A123 Didn’t Deliver Much Juice to VCs

It may have delivered a jolt to the IPO market, but battery maker A123 Systems didn’t produce a high-voltage charge for its venture backers.

A123 priced its shares at $13.50 this morning and they shot up to $20.29 by the end of the day, an increase of more than 50 percent. That was the best second-best debut of the seven VC-backed companies that have gone public this year and the second-best debut for any IPO on a U.S. exchange this year. (Updated: OpenTable rose 59% on its first day.)

Despite the impressive performance, the company’s backers didn’t see a huge return because they invested such a large amount in A123. (See table below)

Prior to its IPO, A123 raised more than $240 million from more than 15 investors over 11 rounds since 2001, according to Thomson Reuters (publisher of peHUB).

The company’s six largest VC shareholders held a combined 32.9 million shares worth $668 million based on today’s closing price. That same group invested at least $161 million in the company, according to Thomson Reuters, which means the group saw an unrealized return multiple of 4.14 on its investment. (VC shareholders typically can’t sell their stock for at least six months after an IPO.)

A123’s largest shareholder is North Bridge Venture Partners, which holds 8.86 million shares (or 9% of the total) valued at about $180 million today. North Bridge invested an estimated $41.3 million over seven rounds, according to Thomson Reuters, for a paper return multiple of 4.35.

(Note that Thomson Reuters sometimes estimates how much a VC has invested in a round when an exact amount isn’t available. For example, if four VCs invest a combined $10 million in a round and none discloses exactly how much it invested, Thomson Reuters estimates that each invested $2.5 million in that round.)

See the table below for a rundown of the five other venture investors with stock holdings disclosed by A123.

It is unclear how well A123’s other venture backers did, since the company didn’t disclose the stock holdings of any investors who hold less than 3% of its shares. Those 11 investors include YankeeTek Ventures (which invested in A123’s first round along with North Bridge and Sequoia), Boston University, CMEA Capital and MIT.

VC Shareholders for A123
Backer Shares % ownshp. Share val.* Est. VC Est. multiple**
North Bridge Venture Partners 8.85M 9.0% $179.8M $41.3M 4.35
GE Commercial Finance 8.28M 7.1% $168M $55.4M 3.03
QualComm Ventures 5.35M 5.5% $108.6M $20.7M 5.25
Motorola Ventures 4.84M 4.9% $98.3M $15.6M 6.31
Sequoia Capital 2.89M 2.9% $58.6M $20.8M 2.82
AllianceBernstein 2.71M 2.8% $55M $7.6M 7.23
* Based on closing price of $20.29 on 9/24/09.      
**Multiple is theoretical. VCs can’t sell shares for at least 6 months  
Sources: Thomson Reuters and A123’s prospectus filed on 9/23/09.  
Compiled by Lawrence Aragon