Beacon Power follows Solyndra into bankruptcy
posted at 8:49 am on November 18, 2011 by Ed Morrissey
At the end of last month, I wrote about Beacon Power, a green-tech company that received over a hundred million dollars in taxpayer-backed credit but who teetered on the edge of bankruptcy. Yesterday, Beacon tipped over, filing for protection from its creditors — and potentially taking $43 million in taxpayer dollars with it:
Beacon Power, a Massachusetts-based company that won praise from renewable power activists and loan guarantees from the federal government, has filed for bankruptcy, potentially leaving taxpayers on the hook for $43 million.
The company, which promised to build storage devices for intermittent power produced by wind and solar power facilities, was never able to attract investors. Coming on the heels of the Solyndra bankruptcy and ensuing scandal, the Beacon Power bankruptcy has a growing number of people calling for an end to federal loan guarantees for risky alternative energy start-ups.
Never is the operative word. By the time the Obama administration handed Beacon parent company EnerDel a huge line of credit, its share price had fallen more than half from its peak two years earlier. Three weeks ago, it was trading at eleven cents a share. According to the report from the Heartlander, the share tumble was worse when put in wider perspective:
According to published reports, Beacon’s shares traded for $47 in 2005 but fell to $3.44 in February 2011 and less than $1 a few months later. The company was cautioned by Nasdaq it was in danger of losing its listing. In late October, the price per share fell to just under 11 cents, leaving the company with a market value of $3 million.
Thus far, no connections to political donors or bundlers have been found between EnerDel and the Obama administration, which makes it different from the Solyndra scandal. The money loss for taxpayers is much smaller than with Solyndra as well, but the carelessness of the Obama administration’s investment strategy is just as apparent with Beacon’s collapse. It shows the folly of government investing taxpayer dollars in companies that investors have already fled.
The Pioneer Institute takes that lesson from this collapse:
“We take a pretty dim view of government getting too deeply involved in private companies and picking winners and losers,” said Steve Poftak, research director for the Massachusetts-based Pioneer Institute. “When they start to rend away from support at the early stage of development—at the science and research stage—and get into the balance sheets of companies, that’s [crossing the line].”
And it’s a recipe for failure, too. Congress should start taking a look at how the DoE chose Beacon as a recipient.
Breaking on Hot Air