Freyr Battery reported a wider-than-expected third-quarter loss early Monday. But FREY stock jumped as the battery startup confirmed talks with potential partners to raise capital.
The confirmation comes after sources told Bloomberg Sunday that private-equity giant KKR & Co. is in talks to invest $500 million into the Norwegian battery company. Freyr is targeting sample cell production at a Norway battery factory in Q1 2023, a "key milestone," according to a Q3 earnings presentation Monday.
Battery companies and automakers are investing heavily in battery technology, as global sales of electric vehicles and energy storage systems grow. Tesla runs battery gigafactories around the world. Traditional automakers GM, Ford and Volkswagen have a growing battery manufacturing footprint and multibillion-dollar battery investments. They are shifting away from gas and diesel vehicles to electric cars.
On Friday, FREY shares jumped after Freyr selected a site in Georgia for its U.S. gigafactory.
Freyr Battery Earnings
Estimates: Analysts polled by FactSet expected Freyr Battery to narrow its net loss per share to 30 cents from 42 cents a year ago. Freyr has yet to record any revenue. The company listed via a blank-check merger in July 2021.
Results: Freyr lost 80 cents a share. That was "due in part to a noncash $70.3 million loss on the fair value adjustment to our warrant liability," the Freyr earnings release said. The adjustment can vary "materially" from quarter to quarter, based on factors such as changes to the FREY stock price, it added.
As of September, the battery startup had cash and cash equivalents of $418.6 million. That was down from $488.4 million at the end of June.
Outlook: Wall Street had projected Freyr Battery will lose $1 per share in fiscal 2022 vs. a $1.24 loss in 2021. Net loss per share is seen growing to $1.60 in 2023 as battery investments ramp up.
On Monday, Freyr Battery said construction of its Norway battery plant is progressing steadily, with deliveries of production equipment set to conclude by year end. The startup expects to start producing sample cells at that facility next quarter, to unlock project financing.
Additionally, Freyr hopes to tie up with financial and industrial partners to raise financing. Discussions are "ongoing," the Q3 Freyr earnings presentation added. Over the weekend, Bloomberg reported that KKR is in talks to invest $500 million. The battery startup has a market capitalization of $1.77 billion.
FREY Stock, EV Stocks
Shares of Freyr Battery leapt 9.8% to 15.15 on the stock market today. FREY stock extended Friday's rally above the 50-day moving average.
FREY stock is highly volatile. But its relative strength line surged this year through early October, the MarketSmith chart shows. A rising RS line means a stock is outperforming the S&P 500.
Tesla stock lost 2.6% Monday. GM stock gave up 2.9% to 39.94, closing just below a 40.20 cup-with-handle buy point. Ford shed 3%.
Among new EV stocks, Polestar Automotive extended Friday's 20.8% gain on narrower Q3 losses and strong outlook. Polestar is jointly owned by Volvo Cars and China's Geely. Rivian eased 2.7% Monday after last week9.1% rally amid earnings.
IRA Beneficiary Named 'Top Pick'
On Friday, Freyr said its Giga America project in Georgia will have an initial 34 gigawatt-hours cell capacity. Upon completion, it is expected to be one of the world's largest battery cell plants.
Giga America is expected to receive $410 million in state and local incentives over multiple phases.
"Today's landmark announcement underscores Freyr's ambition to develop a very strong and near-term operational footprint in the United States," CEO Tom Einar Jensen said in the Freyr news release Friday.
He added: "With the recent passage of the Inflation Reduction Act (IRA), we expect U.S. demand for ESS (energy storage systems), passenger EV (electric vehicle) and other electric mobility applications to grow rapidly over the next decade."
Freyr will initially focus on the ESS market, where demand is rapidly increasing.
Back on Sept. 21, analyst Adam Jonas of Morgan Stanley named FREY stock a top pick.
"The environment is becoming ripe for FREY to become a real player in the global battery economy later this decade," Jonas said.
The top auto analyst added: "We think the onshoring theme spurred by the IRA will help incentivize EV and battery production domestically."
Onshoring To Drive Biggest Capex Cycle Of Century
Jonas expects the energy transition and onshoring to "drive the biggest capex cycle of the century: the Mother of All Capex Cycles." He believes FREY stock "presents a compelling investment opportunity as one of the few publicly traded pure play energy storage names in a position to benefit from the IRA."
However, on Friday, unconfirmed reports said that Tesla is canceling solar projects across the U.S. The move comes as an increasing number of companies batten hatches against an expected economic downturn.
By 2025, Freyr intends to install 50 GWh (gigawatt-hours) of battery cell capacity. The battery startup expects to double that capacity by 2028, and double it again to 200 GWh of annual capacity by 2030.
In parallel with Giga America, FREY is building a Giga Arctic project in Mo i Rana, Norway. It also has a battery project in Vaasa, Finland.
