Its shares dropped nearly 8% to close at US$7.08 on the first day. The company debuted on the NYSE after completing its merger with the special purpose acquisition company Ivanhoe Capital Acquisition at a valuation of US$3.4 billion.
Founded in Boston and formerly known as SolidEnergy, SES is a 10-year-old battery startup that develops rechargeable lithium-metal batteries with double the energy density of current lithium-ion counterparts.
Prior to the debut, SES raised US$275 million in private investment in public equity, or PIPE offering, at US$10 per share from a strategic investor consortium led by Japanese carmaker Honda Motor.
Honda joined a long list of SES backers including General Motors, Korean automakers Hyundai Motor, Chinese carmakers Geely Holding Group and SAIC Motor, along with contract manufacturing giant Foxconn.
SES said it was working with Honda, Hyundai, and GM to deliver practical automotive samples powered by lithium-metal batteries by the end of 2022 and aimed to start production of such vehicles by mid-decade.
“We are in conversations with a few other German OEMs, American OEMs, and other Japanese OEMs. and will announce a few more joint developments in the second half of 2022,” said Hu Qichao, founder and CEO of SES, in an interview with Nikkei Asia in late January.
As competition within the EV space heats up, more automakers are eyeing lithium-metal batteries as key to winning the electrification race.
EV batteries powered by lithium metal, or Li-metal, will have double the energy density of the lithium-ion batteries used in current vehicles and thus provide longer range.
However, safety concerns have prevented the technology from being commercialised, as lithium metal is highly reactive.
When charging, typical lithium-metal batteries tend to form needle-like structures that can pierce the separator, which in turn could create a short circuit and cause a fire or explosion.
SES has come up with a proprietary liquid electrolyte solution that it says reduces the risk of combustion.
The company is building a gigafactory in Shanghai that began sample production in 2021 and is set to produce 1GWh annually by 2023. The battery developer is also putting up a smaller facility outside Seoul.
The Shanghai Giga will serve joint battery developments with non-US partners while the Korean facility will be focused on American carmakers like GM to reduce “geopolitical risks,” said Hu.
Carmakers are moving into battery making, given that cheaper and more efficient power sources are crucial to lowering electric vehicle costs. Hu characterised battery companies and automakers as “frenemies”.
“They are potential customers but they’re also potential competitors,” said Hu.
In addition to developing batteries with OEMs, SES is investing in raw materials mining and developing battery-safety AI systems to gain more leverage and lessen dependence on carmaker partners, he added.
The race for next-generation EV batteries with bigger capacity and better safety records has sparked interest from public investors as well.
Battery startups that have yet to generate revenue are capturing that interest by merging with SPACs, an easier path to the public market compared with a traditional IPO.
SES’ public debut followed that of SolidPower, a BMW and Ford-backed solid-state battery technology listed on Nasdaq through merging with a SPAC in December at a valuation of US$1.2 billion.
California-based QuantumScape, which is developing lithium-metal batteries with Volkswagen, also merged with a SPAC in 2020 at a valuation of US$3.3 billion.
However, the stocks of both companies have tumbled more than 30% year to date. Investors are increasingly sceptical of their prospects amid a challenging market while neither has yet proved their battery technology could succeed in commercial use.
SES projected it to start bringing in revenue in 2024 and will not begin to generate any positive free cash flow till 2027.
“In the near term, (SES share price) will probably be a bit volatile, but I think long term I’m confident that SPAC is the right thing to do, just because of this frenemy dynamic that is happening between car and battery companies,” said Hu.
“To really compete you have to have a lot of money. And if you are not a public company, if you don’t have a lot of cash, if you’re a smaller battery company, then you just cannot survive.”
SES unveiled a 107Ah rechargeable lithium metal battery in 2021 and said it will be used to power next-generation electric vehicles in joint development with automakers.
The 107Ah battery, named Apollo after the Greek god, is said to be the largest rechargeable lithium-metal battery in the world.
But not all believe a 100Ah-plus high-capacity battery is the right way to commence the EV transition to lithium-metal batteries as even smaller ones have not proved safe for large-scale commercial use.
“If you want to show track record, start small, go bigger later. Learn how to walk first before jumping,” said Shirley Meng, a professor in energy technologies at the University of California, San Diego.
In becoming a public company, SES now faces extra scrutiny and under the gun to demonstrate progress quarter by quarter.
“In the coming years, we will see how they succeed in maintaining a track record of safety,” Meng added.