A123 revs up IPO market, not backers

Battery maker A123 Systems (Nasdaq: AONE) jolted the VC-backed IPO market last week, but its venture backers didn’t get a big charge out of it.

A123, which makes lithium-ion batteries for hybrid and electric cars, priced its shares at $13.50 last Thursday and they shot up to $20.29 by the end of the day, an increase of more than 50 percent. That was the second best debut of the seven VC-backed companies that have gone public this year—behind OpenTable, which gained 59% on the first day of trading—and the second-best debut for any IPO on a U.S. exchange this year.

Despite the impressive performance, the company’s backers didn’t see a huge return because they invested such a large amount in A123, according to an analysis by PE Week.

Prior to its IPO, A123 raised more than $240 million from more than 15 investors over 11 rounds from December 2001 to April 2009, according to Thomson Reuters (publisher of PE Week).

The company’s six largest VC shareholders held a combined 32.9 million shares worth $668 million as of last Thursday. That same group invested at least $161 million in the company, according to Thomson Reuters, which means the group saw an unrealized return multiple of 4.14 on its investment. (VC shareholders typically can’t sell their stock for at least six months after an IPO.)

Another 11 investors and an undisclosed number of individuals put an additional $81.4 million into A123, but they didn’t hold enough stock to be listed in the company’s prospectus.

North Bridge Venture Partners, A123’s largest shareholder, holds 8.86 million shares (or 9% of the total) valued at about $180 million last Thursday. North Bridge invested an estimated $41.3 million over seven rounds, according to Thomson Reuters, for a paper return multiple of 4.35.

(Note that Thomson Reuters sometimes estimates how much a VC has invested in a round when an exact amount isn’t available. For example, if four VCs invest a combined $10 million in a round and none discloses exactly how much it invested, Thomson Reuters estimates that each invested $2.5 million in that round.)

Here’s a rundown of the five other venture investors with stock holdings disclosed by A123:

GE Commercial Finance holds 8.3 million shares worth $168 million at $20.29 per share. Based on an estimated investment of $55.4 million over six rounds, it achieved a paper return of 3.03.

Qualcomm Ventures holds 5.3 million shares worth $108 million. Based on an estimated investment of about $20 million over seven rounds, it saw a paper return of 5.25.

Motorola Ventures holds 4.8 million shares worth $98 million. Based on an estimated investment of $15.6 million over six rounds, it achieved a paper return of 6.31.

Sequoia Capital holds 2.9 million shares worth about $21 million. Based on an estimated investment of $21 million over seven rounds, it saw a paper return of 2.82.

• And AllianceBernstein Venture Fund holds 2.7 million shares worth about $55 million. Based on an estimated investment of $7.6 million over two rounds, it achieved a paper return of 7.23.

It is unclear how well A123’s other venture backers did, since the company didn’t disclose the stock holdings of any investors who hold less than 3% of its shares. Other investors in the company include Alliance Capital Partners (which is not affiliated to AllianceBernstein); Boston University Technology Development Fund; CMEA Capital; Espirito Santo Ventures; FA Technology Ventures; Massachusetts Institute of Technology; Novus Ventures; OnPoint Technologies; Procter & Gamble Co.; YankeeTek Ventures and an undisclosed investor. —Lawrence Aragon