SES successfully landed on the New York Stock Exchange, becoming the first stock of hybrid lithium metal batteries in the world. The raised capital is nearly 500 million US dollars. As of the close of the listing day, the market value is 2.428 billion US dollars. Hu Qiming, the founder behind the first share, has an MIT + Harvard background and is still Chinese.
The other side of the story is that SES has been at a loss for 10 years after its establishment, and it will take 3 years for mass-produced products. Even so, it has been endorsed by mainstream car companies such as GM, Honda, and Geely. In the list of investors, there is no shortage of supply chains industry capital such as SK and Tianqi Lithium.
What are the listing details?
Massachusetts Solid Energy (SES), a lithium metal battery company founded by Harvard Chinese Ph.D., completed its listing by merging with the special purpose acquisition company (SPAC) Ivanhoe Capital Acquisition Company.
Listed on the New York Stock Exchange under the ticker symbols "SES" and "SES WS". It is reported that SES raised $480 million in cash after its listing, with a market value of over $3 billion. Dr. Hu Qiming, the founder of SES, said that the funds will be mainly used for the next stage of research and development and production planning.
Concurrent with the combined listing of SES and Ivanhoe Capital, SES also issued an additional $275 million of common stock PIPE at a price of $10 per share. The transaction was completed the day before the listing.
PIPE investors include 6 mainstream car companies including Honda, GM, Geely, Hyundai, Kia and SAIC, as well as Koch Strategic Platforms, LG Technology Ventures, Foxconn, Vertex Ventures, Fidelity Investments Canada ULC, and Franklin Templeton.
The prospectus disclosed that IPO and PIPE additional shares accounted for 15% of SES' share capital. Among them, founder and CEO Dr. Hu Qiming holds 5.6% of 10 times the voting rights, representing 56% of the company's voting rights. South Korea's SK holds 10.6% and is the largest outside investor.
In the list of investors, the number of car companies accounts for half, and the largest single investor is also the car company Honda, which holds about 2% of the outstanding shares of the merged company. At the same time, SES also won a joint development agreement for lithium metal battery A samples from GM, Hyundai, and Honda. The trust endorsement of car companies is evident.
But on the other hand, SES has lost money for 10 years after its establishment, and so far the mass-produced power battery is still on the PPT. Such a company with no products and no income can make so many rim giants rush to send money + cooperate.
What is the magic of SES?
Who is SES?
SES, the full name of SES AI Corporation, Chinese for Massachusetts solid energy. Founded in 2012 and headquartered in Singapore and Boston, the company is a developer and manufacturer of high-performance rechargeable hybrid lithium metal batteries for electric vehicles.
Hu Qiming, founder and CEO of SES, is Chinese. SES is also an academic research project born out of Hu Qiming. In 2007, Hu Qiming received a bachelor's degree in physics from the Massachusetts Institute of Technology (MIT), focusing on solar cells.
His academic experience as an undergraduate at MIT allowed him to see the huge opportunities in the field of new energy and have the idea of starting a business. During his Ph.D. in 2009, Hu Qiming felt that what he had learned was too theoretical, so he returned to MIT and joined the research group of Donald Sadoway on the premise of retaining Harvard's doctoral students.
The research direction is the solid-state lithium battery that will be regarded as the ultimate solution for power batteries in the future. In 2012, Hu Qiming received his Ph.D. in Applied Physics from Harvard.
In the same year, Hu Qiming, who had been preparing for a long time, decided to join the industry and founded Massachusetts Solid Energy Systems, which is the predecessor of today's SES. Hu Qiming has been deeply engaged in the academic field of solid-state batteries for many years, and Hu Qiming seeks the commercial transformation of research results. Therefore, at the beginning of the establishment of SES, all-solid-state lithium metal batteries have become its main focus.
However, in the next three years, the research and development of all-solid-state lithium metal batteries have never been able to achieve breakthroughs due to process and material problems. Under the predicament, Hu Qiming decided to turn around and bet on hybrid lithium metal batteries to seek a breakthrough.
The difference between the so-called hybrid lithium metal battery and the current lithium-ion battery is mainly in the negative electrode material of the battery. The negative electrode of the lithium-ion battery is mainly graphite and silicon, while the negative electrode of the mixed lithium metal battery is composed of lithium metal and special electrolytes.
In Hu Qiming's view, hybrid lithium metal batteries have three advantages in production cost, safety, and energy density compared to today's mainstream lithium-ion batteries. According to SES data, the production cost of hybrid lithium metal batteries is 18% lower than that of lithium-ion batteries. The energy density can reach 400Wh/kg, which is reflected in the endurance performance, and the lithium metal battery will exceed the conventional lithium-ion battery by more than 50%.
At the same time, the lithium metal battery electrolyte can effectively prevent lithium ions from breaking through the battery separator and improve battery safety. However, around 2015, the capital of the battery track was cold. The research and development of SES lithium metal batteries have always been difficult with no money in hand. The turning point will appear in 2020 when the global new energy boom is sweeping, and SES is in the capital market.
According to the prospectus, as of 2021, SES has conducted 6 rounds of financing, with a total financing amount of 270 million US dollars. Among them, the largest financing amount is the D round of financing in April 2021, with a fundraising amount of 139 million US dollars, and the investors have also changed, adding SK, Tianqi Lithium, and other industrial funds in adjacent tracks.
With the funds in place, the research and development speed of SES hybrid lithium metal batteries has also turned on full-speed mode. SES officially disclosed that as of now, SES has been operating in Boston, Shanghai, and Seoul.
In terms of production capacity, SES is currently building two battery factories in Boston and Shanghai. The Shanghai factory is known as the world's largest lithium metal battery production site, with an annual production capacity of 1 GWh. The factory is scheduled to be completed in 2023.
At the product level, in November last year, SES released Apollo, which claims to be the lithium metal battery with the largest single capacity in the world. According to officially disclosed data, the Apollo lithium metal battery has a capacity of 107Ah, a weight of 0.982 kg, an energy density of 417Wh/kg, and an energy density of 935Wh/liter. It is more than twice the energy density of the current mainstream lithium-ion batteries.
Judging from official data alone, it is not unreasonable for SES to allow so many car companies to throw olive branches. But at present, SES, which is still in the product verification stage, still needs to answer an ultimate question:
When is it profitable?
The basis of profitability first falls on mass production. Regarding this issue, the deadline was given by SES: is 2025. According to the progress report, the lithium metal battery will start mass production after the three verification stages A, B, and C. At present, SES has started the A-phase verification and signed A-sample lithium metal battery cooperation development agreements with GM, Hyundai, and Honda.
The SES prospectus disclosed that from 2022 to 2023, SES will start pre-production. It will enter the trial production stage in 2024 with a production capacity of 1GWh/year. In 2025, the SES hybrid metal lithium battery will complete the C round of verification and enter the formal mass production stage, which will reach 11GWh/year.
According to public information, SES currently has two factories known and under construction, with an annual production capacity of 2GWh/year. This means that SES will build more factories to fill the 9GWh/year capacity before mass production in 2025.
How much does it cost to expand capacity?
Taking CATL as an example, it announced at the end of last year that it would invest 1.75 billion yuan to build a battery factory in Germany, with an estimated production capacity of 14GWh/year. That is to say, 1GWh/year production capacity requires an investment of RMB 125 million.
According to this logic, SES needs to invest 1.125 billion yuan, equivalent to 180 million US dollars, only to expand the factory in the past three years. Nearly half of the funds raised this time have been spent. In addition, there are expenses such as raw materials and labor.
Before mass production, SES's revenue was basically zero. As for the profit schedule, although it is not yet known, it can also be compared with peers for a little prediction. Taking LG New Energy as an example, in 2019 and 2020, LG New Energy lost 0.45 trillion and 0.43 trillion won respectively.
In 2021, LG New Energy finally turned losses into profits, with a net profit of about 4.6 billion yuan and a gross profit margin of 24.25%. The SES prospectus predicts that after mass production, the gross profit margin will reach 21% in 2026 and 32% in 2027.
That said, SES will still not be able to break even for at least the next 4 years. As for whether it can actually achieve profitability in 2027, it depends on the market conditions at that time. After all, in the semi-solid lithium battery track, players who want to make a difference and rely on new technologies to change the rules of the game are not only SES.
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