A lithium-ion battery manufacturer, that has created the battery component for use in electric cars for nearly 25 years, has filed for Chapter 11 bankruptcy protection and plans to arrange for new funding, as reported by the American Statesman.
In the past most funds needed by Valence Technology Inc. were made available by billionaire investor and chairman, Carl Berg.
Valence will be protected from creditors by making the bankruptcy petition and, according to CEO Robert Kanode, will be able to continue to produce the lithium-ion batteries for its customers and continue to pay both suppliers and employees.
In a statement Kanode said, "Our goal is to continue to operate and meet customer requirements as we work through the Chapter 11 process as quickly as possible."
The bankruptcy filing shows assets of $31.5 million and debts at $82.6 million.
Not once in Valence's history have they produced enough revenue to cover the costs incurred for development and production. Instead, Valence had over $100 million put into the business by Berg.
It is unknown if Berg stopped investing in the company and, if he did, if that fueled the need for the bankruptcy filing.
Donald Saxman, an analyst with BCC Research speculated, "I wouldn't count (Valence) out entirely. They have a lot of facilities here and in China, too, and if they can continue operations, there's at least a possibility they can recover."
Lithium-ion manufacturers remain optimistic about the future and expect that a momentum will eventually build with consumers and there will be more of a desire for electric cars.
Compared to other battery technologies, Lithium-ion batteries are more stable and environmentally friendly. The technology is not for vehicle use alone; the battery can be used as a backup power source in both industrial and utility needs.
The debate and final vote approving the bankruptcy on July 5 caused some ripples in the existing board: two directors, D.T. and B.R., resigned their positions.
In June D.T. had argued that before deciding on bankruptcy the company should be sure they had full researched or exhausted all other scenarios to remedy the situation.
B.R. criticized D.T. for what he deemed was an "obstructionist" approach in the board's debate. B.R. said that D.T.'s vote against bankruptcy was "unbelievable and a clear violation of his fiduciary responsibility after having held the company up from filing for bankruptcy for several weeks" and then later added, "I am hopeful that he had reasons other than some veiled attempt to protect his own stock position."
Berg holds 44 percent of Valence stock personally or through subsidiaries. Of all of the board members, including the exiting D.T. and B.R., Berg holds the most stock and stands as the sole person with the most to lose in the bankruptcy filing.
At the time of the vote for or against filing for bankruptcy, Berg chose to abstain.
If your business is experiencing hard financial times, or if you are wading through increased debts in your personal life, bankruptcy is a solution. Contact a bankruptcy lawyer to help you with your filing.