Better Place, the electric car venture founded by Shai Agassi, will need to raise at least $500 million over the next four years to reach the operating break-even point, estimate capital market sources. The calculation assumes an annual investment of $120 million into the company, which has been undergoing a massive restructuring which includes layoffs and the closing of activities.
So far as is known, Better Place's cash reserves are enough to finance its operations through August 2013, and it is seeking creating solutions to raise more money. Sources inform ''Globes'' that the company is again considering an equity offering to Israeli investment institutions, among other options.
Better Place has lost $812 million since it was founded in 2007 through the end of 2012, including $424 million last year. The company's auditor attached a going concern warning to its financials. Most of the loss was in the fourth quarter - $251 million - after the company recognized a $179 million write-down on its Israeli operations and for restructuring costs.
Better Place said in response, "The company will raise money this year as it has done in all the years of its operations. The company's management is very confident that it will be able to raise the money needed for its business plan. The company's shareholders support it and have already injected an additional $50 million into it. In the previous quarter, the company reported strong growth in car sales, and this trend should continue. Better Place's management has taken a number of steps to improve the organization, pave the way to profitability and adapt to the market, and has greatly reduced its negative cash flow."
Better Place's losses have not deterred Israel Corporation (TASE: ILCO), which owns the 29% controlling stake in the venture, and whose cumulative share of the loss is $293 million. Israel Corp. controlled by Idan Ofer, who also serves as chairman of Better Place, and run by CEO Nir Gilad, will presumably continue injecting capital into Better Place during 2013, in addition to the $33 million injected as part of the $50 million injected in February.
In Israel Corp's financial report, the company implied that it would continue supporting Better Place, saying, "As a leading investor in Better Place, the company is pleased by its progress in recent months, and will favorably review further investment."
Since 2007, Better Place has raised over $850 million from its main shareholders, including Israel Corp., Idan Ofer personally, HSBC Holding plc (LSE: HSBA; HKSE: 005; NYSE, Paris: HBC), Morgan Stanley (NYSE: MS), and General Electric Company (NYSE: GE). The company raised $100 million between November 2012 and February 2013.
Better Place has gone through severe shocks in the past few months, beginning with the ouster of Agassi as CEO over disappointment in the company's progress and dissatisfaction with the pace of electric car sales. His successor, Evan Thornley, quit after just three months, and other top executives have resigned wholesale. The company has also slashed its workforce by a third, to 600 employees worldwide, 10% of whom have received layoff notices.
The company's recovery effort includes refocusing on its core markets of Israel and Denmark, where hundreds of Renault Fluence ZE electric cars are already on the roads. But the company's revenue was just $7 million in 2012.
Published by Globes [online], Israel business news - www.globes-online.com - on April 4, 2013
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