DG Innovate shares rocketed higher on Monday after the junior batteries and electric motor company said it had hired ex-Tesla executives and raised £2.4m via a convertible note issue.
The company is developing two core technologies: the Enhanced Drive Technology (EDT) electric motors and Enhanced Battery Technology (EBT) sodium-ion electric vehicle batteries.
DG Innovate is among numerous companies exploring the viability of sodium-ion batteries in electric vehicles, including AIM-listed AMTE Power and privately held Northvolt.
The addition of three ex-Tesla executives to the board has sparked a wave of speculation as to what the future holds for the company, especially after one of the incoming directors, Christian Eidem, took a 29% take in the company. The executives have extensive experience at the forefront of electric vehicle innovation, and their appointment is a major vote of confidence in DG Innovate’s technology.
“The new executive management team, with their world-class track record in the electric vehicle and mobility sector, recognise the significant commercial potential in DG Innovate’s technology and the wider opportunity to use DG Innovate as a platform to build a larger company focused on the sector,” said Nick Tulloch, Chairman of DG Innovate.
DG Innovate shares were up 160% to 0.11p at the time of writing.
“Most people will have never heard of DG Innovate yet the stock was certainly shouting from the rooftop as the market opened. Initially surging by 180% in value, this tiny company delivered the type of news that sends small cap investors into a frenzy,” said AJ Bell investment director Russ Mould.
“The research and development company looking to develop next-generation batteries and electric motors has appointed three executive directors, all of whom used to work for Tesla.
“Inevitably, when you see a small business appoint ‘heavyweight’ individuals there is speculation it will lead to a takeover by one of their contacts. The fact they’re linked to Tesla is the cherry on top as it implies to investors that this little-known company could eventually be gobbled up by the electric car giant. This is pure speculation but that’s how many investors operate.
“In such situations, investors look for a strong narrative around a stock and get carried away. Stirring the pot was an equity research group saying the shares could ‘5-10 bag into New Year’, namely increase by five to 10 times in value. That comment doesn’t appear to be based on any concrete analysis.
Mould continued to detail the use of the proceeds from the convertible note raise and suggested the company could raise further funds to facilitate its strategy.
“More noteworthy is that DG Innovate has raised £2.4 million – more than half the company’s value as of last Friday. This money will be used to advance existing projects; however, the new directors have already indicated they will use DG Innovate as a roll-up vehicle for acquisitions in the electric mobility and energy storage space. That implies we could see a succession of fundraises in 2024,” Russ Mould said.
