Axion Power International, Inc. (OTCMKTS:AXPW) is up more than 130% on its December open, and high volume looks set to push the company further as we head into the holiday period. There’s not really been any fresh news on which we can pin the gains, but a couple of developments last month seem to be dictating sentiment, and the overflow impact into this month suggests markets are ready to pull the trigger as and when we get any new news from Axion going forward.
With this in mind, and in anticipation of a release catalyzing further market cap growth, let’s get up to date with where the company stands, see how the latest developments fit into its current operational picture, and try and outline what we’re looking at next as a value driver.
For those not familiar with Axion, it’s an energy storage company based out of Pennsylvania. Specifically, it designs, creates and sells carbon/lead type batteries which its customers use to store, and then use, power for various applications.
Financially, it’s a pretty sad story.
Back in 2013, Axion generated a little over $10.1 million revenues. By the end of 2014, this had dipped to $4.6 million. Full year 2015, revenues came in at just $600K. This year, to date, the company has sold just $35K worth of its batteries, and it’s spent more than $1 million to do so.
Now, that doesn’t look great, but it’s not all bad. The decline came on the back of a pretty poor strategy execution, through which Axion tried to carve out a market in the industrial space, marketing to large organizations and the likes. As highlighted by the new CEO earlier this year, the efforts were made under a poor and inconsistent branding model, and while markets absorbed the company’s products early on, as alternatives progressed, Axion failed to. The company was basically left out in the cold, and it’s now pivoted to try and get back in the race. A different race, that is – one that will see it go straight to the retail customer with its products and target the commercial market.
A new CEO is in place, as mentioned, and he’s got a branding background, so he’s hoping to address the issues that caused Axion to get left behind previously, and get the company back on a path of revenue growth.
So what developments to this end have we seen recently?
On November 21, the company announced that two remote solar powered off-grid applications were set to shift from bench top testing to deployment in the field with Mountain View Solar (mtvSolar) in Berkeley Spring, W.Va. and RAR Engineering in New Castle, Pa. The first, the mtvSolar deal, involves a lighting system that the latter had been testing for three months prior to the promotion from test to deployment. The second is a water remediation system, in which an Axion battery will serve as a sort of back up generator for when the primary system can’t handle the load. Neither are massive deals, and they aren’t game changing for the company, but it’s validation that Axion’s technology is up to date, and we see that as important above and beyond the numerical value of the deals themselves.
Shortly before these upgrades were announced, Axion announced it had entered in to a letter of intent (LOI) with Fengfan Co. Ltd. of Baoding, China (SH. 600482) and LCB International Inc. of BVI. The two companies will sell Axion’s tech in a host of Asian countries, and will inject $5 million into Axion over the twenty-four-month period following regulatory approval. While the mtvSolar and RAR deals weren’t overly important, this one is very important. Axion needs to sort out its balance sheet, and $5 million in non toxic capital is going to go a long way to doing that.
There’s still risk, of course. The $5 million injection aside, there’s less than $1 million on hand, against debts of a little over $4.1 million at September 30. This is a turnaround story, but one that’s going to draw over a long period, and likely involve some degree of dilution.
That said, sentiment is clearly pretty strong on Axion right now, and we think there’s run room on the closing of the Asian deal, which is what we’re looking at as our next major upside catalyst.
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Disclosure: We have no position in AXPW and have not been compensated for this article.