Citron Research Updates Ener1 (AMEX:HEV)


Ener1 management has to learn the difference between vague promises and bankable commitments.  As the company is currently on the road attempting to raise money, Citron encourages management to deliver a more accurate representation of their current “contract” with Th!nk Global to potential investors.

In a previous report, we explained how Delphi sold their 19.5% stake in EnerDel for $27 million in cash and stock, pegging EnerDel’s value at around $1 a share.  And note that, in selling it to Ener1, we note an absence of any other strategic buyers at a higher price.  Yet, even $1 a share is inflated compared to the mountains of cheap stock that management has been able to acquire in the company over the years, the cost basis of which Citron believes to be at well under .50 a share.

Yet, what has struck us most recently as being deceptive is the nature of the contract with Th!nk Global.  In a recent conference given at Collins Stewart, (the same people who were presenting Emcore to the investing public), CFO Jerry Herlihy said not once but 4 times that EnerDel has a “minimum $70 million order from Th!nk” and that they are the only battery company with a firm order in the whole industry. The most recent research report from Think Equity repeats the $70 million order as if it is gospel.  We find the “research” that has been coming out of Think Equity and Gilford to be so superficial and misleading that it is an insult to true informative sell side research.

The claim of a firm $70 million contract is wrong and misleading.  In the 8-K discussing the contract, we read that the deal has no minimums and it is in a testing phase.

Further, Th!nk Global states it intends to give customers the choice among three distinct battery makers when they make a purchase, and to lease the battery to them at that point.  So this “deal” is obviously just a sales plan, not a firm order. 

We have nothing against development stage companies raising money.  Citron just believes that information should be presented fairly and accurately.

In our own communication with Th!nk North America within the last month, we can read this exchange:


I will forward your questions on to Norway but from what I have learned, no final decisions on battery manufacturers have been announced.  The only battery supplier who is currently supplying batteries to us at this point is the Zebra sodium battery manufacturer. All lithium manufacturers are doing testing at this time. The Ox concept vehicle is so far out (2011/2012) that no decisions have been made as to which battery will eventually go into that vehicle.

Once I hear back from Norway, I will forward any information to you if it differs from what I wrote above.

Thank you again for your interest in TH!NK North America.,

Vicki Northrup
TH!NK North America
2750 Sand Hill Rd
Menlo Park, CA 94025

BTW…the Zebra battery is from Mes-Dea, a Swiss battery manufacturer.

But these wild claims from management don’t seem to be new behavior for Ener1.  When Mr. Herlihy joined Ener1 we read in the press release from Chairman Grassenheimer :

“Jerry Herlihy has been working with Ener1 Group, the majority holder of Ener1 Inc, since mid-2004, and has done an excellent job of taking Splinex Technology from pure research to commercialization.”

Yet, when we look at the public filings from Splinex, we find that beyond all the expectations and praise, the cumulative revenue from Oct 28 2003 to March 31, 2008 was a mere $3,911 (and no, the figure is not in thousands).

Beyond the questionable ownership structure of Ener1, and the culture of cheap stock matched to the habituated changing business models, we still await a real customer and a real purchase commitment as we still ask the question:

“If you have a better mousetrap, than where are your mice?”

Cautious Investing To All