ADN - Advent Technologies: Prepare For Dilution Later This Year

Summary

• High-temperature polymer electrolyte membrane (“HT-PEM”) technology start-up Advent Technologies is struggling with delays in backup system deployments and anticipated government grants.
• According to management, discussions with the Greek state regarding initial funding of the company's large-scale "Green HiPo" project are ongoing, but no update has been provided in recent months.
• As the complementary "White Dragon" project appears to have been shelved for the time being, uncertainties regarding the implementation of "Green HiPo" have increased.
• At the quarterly cash burn level projected by management, Advent is likely to run out of funds in the second half of the year.
• Given apparent delays in government grants, elevated cash usage as well as limited access to corporate debt markets, investors will likely have to prepare for substantial dilution in the second half of the year. Consequently, I would advise readers to avoid the shares or even consider selling existing positions.

Advent Technologies Holdings (ADN) or "Advent" labels itself " an innovation-driven leader in the fuel cell and hydrogen technology sectors " but has predominantly been employing a roll-up strategy focused on high-temperature polymer electrolyte membrane ("HT-PEM") technology.

HT-PEM fuel cells don't require pure hydrogen and can handle almost any low- or zero-carbon fuel. In addition, Advent asserts its technology to be highly resilient and enable a more efficient heat management.

Advent used the 2020/2021 ESG hype to obtain a backdoor listing by combining with SPAC AMCI Acquisition Corp. in February 2021.

The transaction raised an aggregate $158.3 million in capital, including $93.3 million of AMCI's cash in trust and $65 million from a PIPE investment led by Jefferies LLC and Fearnley Securities.

Over the past two years, the company has spent most of the funds for covering operating losses as well as a number of acquisitions. At the end of Q3/2021 , cash and cash equivalents were down to $42.5 million.

Considering the current $11 million quarterly cash burn rate stated by the CFO on the company's analyst day last year, Advent would run out of funds in the second half of this year.

Adding insult to injury, the company will fall well short of its original $23 million sales projection for 2022 allegedly due to delays in anticipated backup power system deployments in Asia and lower than expected government grants.

Keep in mind that management actually raised expectations on the Q2 conference call following the €782.1 million EU funding ratification related to the company's large-scale Green HiPo project in Greece:

Unfortunately, the complementary "White Dragon" project appears to have been shelved for the time being thus causing substantial uncertainties regarding the implementation of Green HiPo.

Moreover, it is important to note that the Greek state funding will cover below 20% of the anticipated total €4+ billion investment required for Green HiPo.

Raising €3+ billion in additional funding looks like a Herculean task for tiny Advent Technologies, particularly when considering the company's very weak financial condition.

According to statements made by management on the Q3 conference call three months ago, discussions with the Greek state have been " progressing " but in contrast to management's expectations, no update has been provided since then.

Bottom Line

Given apparent delays in government grants and ongoing, elevated cash usage as well as limited access to the corporate debt markets, investors will likely have to prepare for substantial dilution in the second half of the year.

Consequently, I would advise readers to avoid the shares or even consider selling existing positions.

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