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SLDP Stock: Wait for a $5 Entry Point to Buy Solid Energy


Solid power (NASDAQ:SLDP) stock is one of the new entrants in the field of next-generation batteries. SLDP stock started trading recently. This follows its recent merger with a special purpose acquisition company (SPAC), Decarbonization Plus Acquisition Corp III.

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Solid Power has battery technology that, on paper, promises to transform the industry. Better quality batteries are essential to help the electric vehicle (EV) revolution because today’s batteries are the weakest link in the supply chain. A cheaper battery that holds a stronger charge could change the industry.

Unfortunately, Solid Power has almost no revenue yet, as it is in the early stages of development. As our Josh Enomoto said, this company looks more like a clinical-stage biotech than a full-fledged industrial company at this point. As such, the SLDP stock is reserved for people with a high risk tolerance.

A long road to meaningful revenue

The big problem here is that Solid Power is far from significant commercial production. The company intends to move to D-sample testing of its high-grade silicon anode cells in 2025. It hopes to reach a similar stage for its Li Metal Anode Cell product line in 2027. After D-samples , if things go well, then significant commercial production can begin.

It’s all well and good that Solid Power can hit solid benchmarks in its first tries. This is the basis of a good venture capital investment.

But, as I’ve said many times with other next-gen batteries QuantumScape (NYSE:QS), I’m skeptical that a company like this should ever be listed on the stock exchange. Indeed, with QS shares, shares are now down more than 80% from their all-time highs. Traders get bored once the initial hype wears off.

2025, let alone 2027, is a very long time to see if the product works and if there is a commercial market for it. The stock market being so volatile and tough on speculative companies lately only makes things worse. Who has a five-year investment time horizon for a money-losing science project like this right now?

SPAC: patience is a virtue

A year ago, just about any SPAC would be guaranteed to score a nice pop once they finalized a deal. Markets were bullish and investors rushed to pour money into these new opportunities.

A year later, however, the allure is gone. Many SPACs collapsed amid unrealistic revenue projections, painful capital increases and a market that turned sharply against unprofitable “disruption” stocks. These days, there seems to be little reason to buy a SPAC around $10. Most of them end up trading up to $5 or even below as people demand a big discount from the opening bid price.

I can see it also through this particular SPAC sponsor. You may have noticed that the SPAC that merged with Solid Power is Decarbonization Plus Acquisition Corp III. Which brings us to the question, “What happened to the first and second SPACs in the Decarbonization Plus series?”

Glad you asked. The first is now Hyzon Motors (NASDAQ:HYZN). Hyzon is in the fuel cell industry with a focus on heavy trucking applications. Shares traded above the $10 mark at one point but slumped amid slowly rising earnings and allegations from short sellers of fake orders and misleading management claims . HYZN stock has bottomed out at $3 and is currently trading around $5.82.

The second decarbonization SPAC is Tritium DCFC Limited (NASDAQ:DCFC). This is a small negative margin electric vehicle charging company that is losing money. Like many SPACs, the DCFC stock has been volatile; it hit $19 at one point. However, the stock also fell to $6.42 per share and is below the $10 mark. Generally, there is simply no rush to buy these post-SPAC merger companies, at least not before their prices drop significantly from the open $10 level.

The essential

Chances are Solid Power will take the form of a Hyzon or a QuantumScape. That is, after the initial buzz wears off, the stock plummets. When there is not much revenue and certainly no profit to report, investors tend to lose patience.

A history stock has little appeal in a market where tech names in general are in decline. And the SPAC climate has changed so much over the past 12 months. When QuantumScape was running hot, it was the big name in batteries. Now, there are a slew of publicly traded battery stocks to choose from, and so none of them are attracting much lingering interest from traders.

All this to say that there could possibly be a day when SLDP stock shines. But that day is not likely to be in the near future. The story phase of the SPAC boom is over. Now, companies must demonstrate tangible results. And Solid Power is still far from having reached this stage of its evolution.

As of the date of publication, Ian Bezek had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Ian Bezek has written over 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a junior analyst for Kerrisdale Capital, a major New York-based hedge fund. You can reach him on Twitter at @irbezek.

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