Garth : To respond to your three notes, briefly:
1. Agreed - Ballard has excellent management
2. The concept of "arms length bargaining" is meaningless when an auto supplier has only one customer - ask anyone whose only customer is Ford, GM, Chrysler, etc. The big guy names the price, you take it. And I can tell you what D-B's price is likely to be - breakeven or tiny margins, until the joint venture is humming. Ballard will have no alternative.
3. Car companies outsource when they have other sensible choice - it is not their preference. I can just imagine BMW looking forward to selling cars with a Mercedes engine! This announcement will stimulate car companies to investigate other options that won't put them at the mercy of a major competitor for the most crucial part of their vehicle, the engine. I expect you will see lots of money spent on battery cars, hybrids, and even PEM cells made by others.
I also expect to see few or no further deals between any other car companies and Ballard. No one wants to spend money to help D-B. As time goes by, Ballard will have no choice but to jump when D-B says so.
4. I know D-B has been spending money on fuel cells for many years. In fact, I would guess that is has spent more working with ERC on its molten carbonate fuel cells for stationary power than it has with Ballard so far, although that will change going forward. (That's OK, ERC is making great progress on its own, and doesn't have to beg a big company for help to commercialize its technology.)
But all that money is called R&D spending, which the accountants say has to be expensed. If you want to say it still has value, I agree - but the coincidence of it being worth exactly enough to bring the stated value of the deal from $25 to $35 makes it the sort of smoke and mirrors that any reasonably bright investor should be able to recognize for what it is. D-B paid $25 a share in cash, which is less than the stock was selling for. But I still think it is a great deal for Ballard, because I think it is a lot more than the stock is worth. |
