Maxwell Technologies, Inc. to be Acquired by Tesla, Financial Health Check

Maxwell Technologies, Inc. 

Maxwell is a global leader in the development and manufacture of innovative, cost-effective energy and power delivery solutions. (NASDAQ: MXWL) has developed and transformed its patented, proprietary and fundamental dry electrode manufacturing technology that it has historically used to make ultracapacitors to create a breakthrough technology that can be applied to the manufacturing of batteries.

The company’ ultracapacitor products provide safe and reliable power solutions for applications in consumer and industrial electronics, transportation, renewable energy, and information technology.

On 4th Feb 2019, the company announced it has entered into a definitive agreement to be acquired by Tesla, Inc.  Tesla will commence an all-stock exchange offer for all the issued and outstanding shares of the Company, after which the Company will be merged with a Tesla subsidiary and become a wholly owned subsidiary of Tesla.

Key takeaways/Synergies:

  • Tesla CEO Elon Musk has said that ultracapacitors could be a relatively better bet for an electric tech breakthrough.
  • The all-stock deal would value Maxwell at about $218 million, a 55 percent premium over its market value on Friday 2nd Feb.
  • The takeover was announced at a very crucial time for Tesla, as it advances the manufacturing of its lower cost Model 3 
  •  The investor community sees robust demand for a power application targeted at capturing the hybrid electric vehicles market with revenue potential of above $1 billion.
  • Maxwell’s range of automotive solutions including dry battery electrode technology, peak power, autonomous driving, and E-active suspension applications are expected to derive strong synergies from the deal and will position Maxwell as an extremely strong player in the industry.
  • The sale of Maxwell was approved unanimously by the company’s board of directors, who expect the deal to be completed in the second quarter of 2019.
  • Maxwell will now become a wholly owned subsidiary of Tesla (subject to completion of acquisition).

Management Commentary:

“We are very excited with today’s announcement that Tesla has agreed to acquire Maxwell. Tesla is a well-respected and world-class innovator that shares a common goal of building a more sustainable future,” said Dr. Franz Fink, President and Chief Executive Officer of Maxwell. “We believe this transaction is in the best interests of Maxwell stockholders and offers investors the opportunity to participate in Tesla’s mission of accelerating the advent of sustainable transport and energy.”

Investor tracking Maxwell believes this takeover is of immense value for Maxwell and will help fuel its mission of development and manufacture of innovative, cost-effective energy and power delivery solutions.

Other recent announcements/highlights:

On Feb 1st, the company announced that it would be exhibiting at two key grid and utility conferences this quarter.  Maxwell will showcase two ultracapacitor subsystems for grid energy storage: the Grid Energy Storage System (GESS) and the Grid Cell Pack (GCP). These highly scalable products deliver reliable, fast-responding, long lifetime storage in grids and microgrids. Both products address the growing need for power-intense grid services and are designed to stabilize voltage and frequency, firm renewable power output, provide bridging and ramping services and improve generator response.

When and Where:

  • DistribuTECH – February 5-7, Ernest N. Morial Convention Center, Booth #10829, New Orleans, Louisiana
  • Energy Storage Europe – March 12-14, Messe Dusseldorf, Hall 08B, Stand # 8BC16, Dusseldorf, Germany

On Jan 9th, the company announced the launch of a new full-featured 3.0-volt (3.0V) product platform. With the introduction of these next-generation ultracapacitors, users have the ability to increase energy and power in the same form factor as the 2.7-volt product line and can significantly cost-optimize their system designs by using fewer ultracapacitor cells or modules. Alternatively, users can upgrade to a 3.0V solution to extend the expected life of their products. The 3.0V platform is designed for single-cell applications as well as multi-cell complex module systems.

On December 19th, the company announced it has simultaneously signed and closed a definitive agreement to sell its High Voltage (HV) product line to Renaissance Investment Foundation. Maxwell sold all shares of its Swiss subsidiary, Maxwell Technologies SA, and its CONDIS®  line of high voltage capacitors for $55.1 million in cash and up to $15 million in potential future milestone payments to a special purpose holding entity and affiliate of Renaissance. This action was taken to put the necessary resources in place so Maxwell can better focus on its key initiatives.

About the Company:

Financial results (in thousands):

Revenue and Gross Margin

Total revenue for the third quarter of 2018 was $33.7 million, compared with $29.5 million for the second quarter of 2018. Energy storage revenue for the third quarter of 2018 was $26.5 million, compared with $22.7 million for the second quarter of 2018, driven by seasonal growth in wind and sequential growth in the non-China bus. High voltage capacitor revenue was $7.2 million for the third quarter of 2018, compared with $6.8 million for the second quarter of 2018.

Gross margin for the third quarter of 2018 was 18.9% compared with 18.4% in the second quarter of 2018, driven primarily by the slight increase in high voltage capacitor product sales, which generally have higher gross margins than the corporate average.

Liquidity: As of September 30, 2018, Maxwell had approximately $23.6 million in cash, in addition to a Revolving Line of Credit for up to $25.0 million. As of September 30, 2018, no borrowings were outstanding on the Revolving Line of Credit and the amount available, based on borrowing base limitations, was $16.3 million.

Maxwell’s operating plan for the next 12 months takes into account existing cash resources and funding requirements, and management is currently evaluating avenues to reduce operating cash outflows and to potentially defer certain capital expenditures given the current state of its high voltage product line, including delays in various infrastructure projects and uncertainty from tax reform legislation and tariffs.

Fourth Quarter 2018 Business Outlook

  • Total revenue is expected to be in the range of $25 million to $27 million.
  • Gross margin is expected to be 17.3%, plus or minus 100 basis points.
  • Non-GAAP gross margin is expected to be 19.0%, plus or minus 100 basis points.
  • GAAP operating expense is expected to be in the range of $14.6 million to $15.0 million.
  • Non-GAAP operating expense is expected to be in the range of $12.6 million to $13.0 million.

Risk Factors & Stock Influences:

  1. Growth in overall cash generation and the company’ ability to maintain liquidity/financial flexibility to support its ongoing and upcoming ventures.
  2. Successful completion of the acquisition mentioned above leading to the materialization of expected synergies.
  3. Company’ upcoming performance especially with ultracapacitors that is likely to provide growth in 2H19.
  4. The overall performance of the economy and more importantly China market along with the impact of the US-China trade dispute.
  5. Company’ performance in several of its key markets in 2019 will continue to remain key operating parameter and will set the stage for the next phase of MXWL’ growth.
  6. The company operates in a rapidly changing fast paced industry.  Therefore, it must continue to launch, innovate and enhance products to enhance its market share.

Stock Performance

  • On Monday, Feb 4th, 2019, MXWL is trading at $4.61 (up 50%), with a robust volume of 7.5 million shares exchanging hands. Market capitalization is $211.231 million. The current RSI is 85.02
  • In the past 52 weeks, shares of MXWL have traded as low as $1.77 and as high as $6.27
  • At $4.61, shares of MXWL are trading above its 50-day moving average (MA) at $2.46 and above its 200-day moving average (MA) at $3.81
  • The present support and resistance levels for the stock are at $2.92 & $3.16 respectively.  


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