A123 Systems Goes Public With a Splash

In this Aug. 6, 2009 photo, A123 Systems Inc. high power Nanophospate Lithium Ion Cell for Hybrid...

In this Aug. 6, 2009 photo, A123 Systems Inc. high power Nanophospate Lithium Ion Cell for Hybrid Electric Vehicles batteries are shown in Livonia, Mich. Shares of battery maker A123 Systems are surging 36 percent Thursday, Sept. 24, 2009, with its initial public offering on Nasdaq.(AP Photo/Paul Sancya)

(AP)

Investors snapped up shares of A123 Systems in their debut Thursday, showing a willingness to overlook millions of dollars in losses and make a bet that next-generation battery technology will propel the cars and trucks of the future.

Watertown, Mass.-based A123 Systems makes lithium-ion batteries, the technology chosen to power General Motors' highly anticipated electric car, the Chevy Volt. A123 lost out on the contract for the Volt but was picked to build batteries for Chrysler's next generation of electric cars.

Founded by Massachusetts Institute of Technology scientists, A123 lost more than $40 million in the first half of this year. But with the government pressuring automakers to build more fuel-efficient automobiles, investors obviously feel there is money to be made as companies compete to be the suppliers of the next power source for sedans, crossovers and pickups.

A123 Systems Inc. said its lithium-ion battery will provide more power, last longer and operate more safely than other batteries.

The company has been contracted by Chrysler and in August received a $249 million grant from the U.S. Department of Energy, yet critics note the company has never made money and say the clamor for A123 shares is misguided.

Still, it was among the most lucrative first-day IPO's this year on a percentage basis, trailing only software company OpenTable Inc. A123's shares gained $6.79, or 50.3 percent, to close at $20.29.

A123's technology is similar to that used in laptops and cell phones, which use a lot less power but have still run into problems.

Last year, computer makers recalled 100,000 laptop battery packs made by Sony Corp. because of overheating related to lithium-ion cells. Making the same batteries for cars would require even more power and generate more heat.

"So you end up packing a reactive metal, which is lithium, in a flammable substance very, very close together," said Don Hillebrand, director of the Transportation Research Center at Argonne National Laboratory. "You can do this, and you can do it safely, but it requires a more expensive manufacturing process."