A123 Explodes in First Day Trading, Near $20 a Share

A123 Systems is zooming in the first day of trading. The company yesterday sold 28.1 million shares for $13.50 each to raise $380 million.

The stock is currently trading at $19.65 and briefly touched 20. Right now, that's a 45 percent gain.

Not bad for a company that's never turned a profit!

The gains are even more remarkable when you consider that it upped its IPO price twice right before trading and increased the number of shares for sale. Right before the IPO, it had anticipated selling 25.7 million shares for between $10 and $11.50 each. Earlier, A123 said the company would likely select a stock price was between $8 and $9.50.

Optimists say that this could be a wellspring for future clean IPOs, but it has skeptics too. The company mostly makes batteries for power tools but has branched into some experiments in smart grid. It will make batteries for the automotive market – for Chrysler. Here's a summary of info from the S-1.

Is it sustainable? It's hard to say. On one hand, we are living through the golden age of batteries. Five years ago, few people cared that much about them. Now, the federal government is lavishing grants on battery makers and utilities and car makers both say they plan to incorporate lithium-ion batteries into their operations and products. A123 is ahead of many of the startups and already ships batteries to customers. The company emerged from MIT in 2001. It also has friends at General Electric and BAE Systems.

On the other hand, a lot of well-established giants in Asia make these already. Can a startup make headway? Plus, we've lived through IPO fever before. Remember Larry Augustin? Probably not. But he was a billionaire on paper for about ten minutes after VA Linux went public.