Aspen Aerogels Inc. - ASPN
Is Koch heading for the exits?
Back on June 29th, 2021, the folks at ASPN announced that Koch Strategic Platforms agreed to buy 3.42M shares of their common stock and invest $75M into the company. If you’re keeping track, that works out to $21.66 a share. The stock had closed that day at $24.07, but on the news of this investment the shares would close almost $6 higher the following day and by July 1st the stock was trading for $35, making this a fairly decent investment for the investment vehicle of the Koch brothers.
At the time, the company was riding high on the announcement that they would be entering the EV space with a product called Pyrothin, which is a “thermal barrier” used by EV makers in their battery packs to help prevent runaway thermal events should batteries ever decide to go rogue. By the end of 2021 with the shares retreating from the $60 level, I pointed out to my clients and subscribers that the level of investment required for ASPN to enter this market compared to their size would be tremendous, and that the limited test runs of Pyrothin that they were manufacturing carried incredibly negative gross margins, meaning they would need a ton of volume in order to simply break even.
The stock would soon begin a long and slow decline, eventually taking their shares back to the level they were prior to the Pyrothin announcement.
It was during this decline, on February 17th, 2022, that ASPN announced that the folks over at Koch Strategic Platforms were doubling down and decided to invest an additional $150M into their company, but this time in a stock/convertible transaction. On February 17th their shares would close at $25.92 and over the next couple of months would once-again be north of $30, but the announcement that they would need to raise an additional $750M in order to build their new factory and plant down in Georgia along with significant earnings and EBITDA losses was just too much for investors, and the shares would be back to single digits by the summer.
By the end of 2022, ASPN was forced to offer shares to the public in the single digits, and as it turns out, the folks at Koch Strategic Platforms were only too happy to oblige. In a November 29th 2022 underwritten public offering, KSP would be buyers of an additional 10.5M shares of stock at $9.50 for an additional $100M investment, bringing their overall ownership of the company to 27.6%. Wow.
Fast forward to yesterday.
On the news of a blow-out revenue and earnings report the prior day that brought their shares back to levels unseen in almost 3 years, the company filed an S-3 to register 21,070518 shares for sale for selling shareholders.
Who is Spring Creek Capital LLC? Or rather, Wood River Capital, as in the below name of selling shareholder? It’s sorta frustrating that when you look at the NASDAQ web site for institutional holders that you get neither of these names popping up, but rather KIM LLC.
Why, all of them are related to Koch, of course!!!
So from the filing, the first tranche of 3,462,124 is from their initial $75M investment.
The next 2 amounts, 5,290,092 and 1,791,986 is from their $150M stock and convertible investment.
The final 10,526,316 is from their $100M underwritten investment.
You take those 21,070,518 shares divided by 75,762,893 (from their recent 10Q) and you get 27.81% of all outstanding shares, or pretty much exactly everything that they supposedly own.
So, has Koch had enough of their now-3+ year investment in shares of ASPN? Click on KIM LLC holdings in that NASDAQ page and it is by far their largest position. Based on the press release reports with dollar amounts, KSP invested $325M into ASPN shares over the years, and with shares currently trading in the $25 range, could claim a nifty little profit on their sale, which wasn’t always a certainty.
Lots of companies have deals with related parties like this to register their shares after a certain period of time, but rarely is that period longer than 180 days or maybe a year. Some of these shares were first sold over 3 years ago.
Which leads to the question. Why now? Is Koch signaling that it is heading for the exits? If so, that’s quite a bit of supply coming to market, and I would imagine it would be in underwritten offerings rather than periodic market sales.
I will be adding ASPN shares back onto my interest list in June, and will be providing some further comments regarding their recently release Q1 2024 results, so please feel free to share and subscribe if you care to learn some more.
I also have some extensive comments posted from prior years should you wish to brush up on some history.