Satcon listed under Fuel Cell Electronics and Test Equipment.
The Hydrogen & Fuel Cell Investor web page.
h2fc.com
This is from a 10/99 investment report by P.R. Herzig & Co. Inc. 45 Broadway NY, NY 10006 (800) 275-2920
Valuation
We believe SatCon, with a current market value of about $100 million, to be significantly undervalued. We acknowledge however that there
are few traditional methods with which to value an emerging technology company like SatCon. Commercial markets do not yet exist so
revenue growth is only a future expectation. Equity at $1 per share offers few clues. Earnings do not exist. Perhaps R&D expenditures, $80
million since l992, could be capitalized, but at what rate? One method would be to compare SatCon's valuation relative to companies which
are involved in the same nascent markets. Although SatCon's portfolio of technologies makes it a unique company with no directly comparable
competitors, it shares markets with such companies as Ballard Power, Mechanical Technology and Plug Power.
As the chart below suggests, the marketplace expects fuel cells to be a large market. While SatCon shares the fuel cell market with Ballard,
Mechanical Technology and Plug Power, its valuation is only a fraction of theirs. Furthermore, fuel cell systems are only part of Satcon's future.
Flywheels, electronic chips, and advanced motors also hold substantial value which we believe the market has ignored.
We note that SatCon has quite a small active float. Of the 9.6 million common shares issued, David Eisenhaure, Chairman and CEO, owns
almost 2.9 million shares. Duquesne Enterprises owns an additional 800,000. We estimate that the active float is only 5.9 million shares, a
factor that would work to shareholders advantage should SatCon be able to perform up to its potential. The convertible preferred issue is
currently restricted as to sale but ultimately converts into an additional one million common shares.
Risks
An investment in SatCon entails substantial risk and therefore must be considered speculative for many reasons, some of which we note below:
Commercial markets for many of SatCon's products do not yet exist and SatCon has not yet proven its role in those markets.
Timing of introduction and pace of commercial acceptance of new technologies is inherently uncertain. Our experience tells us
there are always delays which can lead to investor disappointment.
While management is technologically astute, scarcity of seasoned business and manufacturing managers at the company raises
questions as to its ability to manage a production ramp up and rapid growth.
There is the risk that SatCon could lose its technological, competitive edge to competitors. |
