The IPO market witnessed relatively less activity this year compared to 2021, which was a record year for public listings. Uncertainties related to the Russia-Ukraine conflict are also contributing to the slump. Expion360 Inc., a provider of lithium battery solutions, recently revealed plans to go public.
The Redmond, Oregon-based company will be offering 2,145,000 shares at an estimated price between $7 and $9. Post-IPO, the shares will start trading on the Nasdaq Capital Market under the ticker symbol XPON. The book-runners in the offering are Paulson Investment Company and Alexander Capital.
Off-the-grid Power
Expion360 produces and distributes lithium iron phosphate batteries used primarily in recreation vehicles and applications like marine systems and golf carts that require off-the-grid power supply. The company was founded in 2016 by John Yozamp, who is currently serving as its chairman and chief executive officer.
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The primary challenge facing Expion360 is rising operating losses, which don’t bode well for it in the current situation. There are concerns that the use of substantial cash to build revenue from a low base, thereby incurring heavy losses, might not be sustainable.
Cost Pressure
In fiscal 2021, the company incurred a net loss of $4.72 million or $1.63 per share, sharply wider than the previous year’s loss of $0.88 million or $0.36 per share. Prospective investors would be weighing this factor before making their buying decisions.
The dismal bottom-line performance reflects high production costs and operating expenses, which more than offset a sharp increase in revenues to $4.52 million from $1.57 million in fiscal 2020. Hence, there is uncertainty over the company’s ability to achieve profitability in a time-bound manner.
New Markets
On the positive side, Expion360 is ramping up its product portfolio by expanding into areas like industrial applications and home energy storage, thereby opening up additional revenue streams. It will be targeting customers looking to shift from lead-acid batteries to more reliable energy options. This would contribute to improving the earnings performance in the long term.
Read management/analysts’ comments on quarterly reports
The growing demand for lithium batteries in the transportation sector and the portable battery market, in general, is expected to accelerate growth for the industry, which is expected to expand at a compound annual rate of 5% in the next two years. Currently, Expion360 faces competition from the likes of Dakota Lithium and Battle Born Batteries. Meanwhile, high raw material costs and ongoing supply chain disruption would be a drag on the industry’s growth in the near term.