EOSEW - EOS Energy Enterprises: Cerberus Transaction Terms Look Plain Ugly - Sell

2024-06-25 10:13:45 ET

Summary

• Shares of zinc-based energy storage solutions provider Eos Energy Enterprises, Inc. rallied upon news of an up to $315.5 million strategic investment by an affiliate of Cerberus Capital Management LP.
• However, a closer look at the transaction terms reveals a highly dilutive transaction, with Cerberus grabbing up to 49% of the company's equity in return for providing an expensive loan.
• Even worse, the loan is governed by harsh covenants and funding of additional tranches will be dependent upon the company achieving a number of complex milestone requirements.
• With the loan secured by substantially all the company's assets, Cerberus might end up owning the business at some point going forward.
• Given the massive dilution associated with the Cerberus loan agreement and considering the very real risk of the company failing to achieve complex milestone requirements or comply with harsh covenants, I am downgrading Eos Energy Enterprises common shares from "Hold" to "Sell."

Note:

I have covered Eos Energy Enterprises, Inc. ( EOSE , EOSEW ) previously, so investors should view this as an update to my earlier articles on the company. ...

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