I wanted to get a quick article today out about the very exciting news released today: ALPP will be forming a joint venture between RCA and Elecjet called RCA Batteries. I’ll get into some brief background about what this means, and then give my take on it.
You can read more about the new structure here, but here’s the breakdown of how it will work. RCA and Elecjet have now formed a joint venture (“JV”) called RCA Batteries. RCA Batteries will now become the manufacturer and distributor of Elecjet’s proprietary graphene batteries. Elecjet will continue to manufacture electronics components in the meantime. The president of Elecjet will also head up the new JV.
What does this mean?
Elecjet is essentially granting this related party JV the rights to all of its intangible property. Elecjet is going to rely on RCA’s expertise and existing infrastructure in manufacturing and distribution to handle the business side of Elecjet’s batteries. What this signals is that Elecjet is more effective at the development side of things, whereas RCA has the required infrastructure to bring the products to market, coupled with a strong brand name in RCA.
Why I Love the Move
This is very exciting news in my opinion, and the market agreed today. This move is the manifestation of ALPP’s business model and how it drives value for shareholders. Recall, RCA was labeled as a Facilitator and a Stabilizer at the time of acquisition. Furthermore, Elecjet was labeled as a Facilitator and a Driver. Now, for you ALPP veterans, you should see the two companies and their DSF labels and know immediately that these two were always designed to work together.
So why was this JV and partnership between the businesses such a good move for the shareholders?
Conglomerates and Synergy
When we think about a company like ALPP which is acquisition focused, the two ways they drive value to shareholders are by finding bargain deals as well as through synergizing acquired companies. What does that mean?
Bargain deals are pretty self-explanatory. ALPP drives value for shareholders through management’s expertise in identifying undervalued small businesses which can be brought under the ALPP umbrella at bargain prices.
The other more difficult to quantify method is through acquiring mutually beneficial and synergistic companies. What ALPP is in the position to do is acquire companies that, when combined and interacting with each other under the same umbrella, unlock even more value than when the companies were operating separately.
This is due to ALPP having the capital and investment power to take over a somewhat inefficiently running set of businesses, put them together, and have them run much more effectively. But remember, the acquisition prices/valuations were based on an inefficient running company. So theoretically the prices were at a discount to their combined valuation once part of ALPP. Sounds pretty good, right?
RCA Batteries JV
Let’s now extrapolate my above logic to the new JV. ALPP was able to combine two business which were missing a piece to the puzzle.
RCA, on the one hand, has an established network of distribution and manufacturing all ready to go, as well as a strong brand name that millions of people already recognize. What RCA lacks, however, is a cutting-edge technology that can bring exponential growth. Hence why the company was labeled as a Stabilizer, not a Driver.
Elecjet is quite the opposite. Elecjet is in a high growth battery market developing novel technologies through its graphene battery technology (among others). What it lacks, however, is that established manufacturing, distribution, and brand recognition network that RCA has already established. Presumably, Elecjet as a standalone company would have had some issues bringing their new product lines to market.
This is where the ALPP value case comes in. By acquiring two companies that are “missing something” and bringing them together, they are able to combine two theoretically under-priced businesses into one highly efficient business. On top of that, ALPP also made mention to QCA and how it will also be involved with manufacturing RCA Batteries products.
Now, a word of caution (if that’s the right word). ALPP has stated that the goal is to get full capacity graphene battery manufacturing up and running by Q4 2023. This is clearly a long-term project, so I don’t want to hear people complaining in a few months wondering where the manufacturing results are! That being said, the release did say that smaller scale production should be starting around Q2 2022, so in just a few months.
What all of this shows to me is that the ALPP DSF model is in full swing and is clearly working. ALPP is identifying companies which can fit “synergistically” into the ALPP family and not only enhance the acquired business, but also have that acquired business enhance other ALPP companies.
Furthermore, we are currently going through a bit of a “battery revolution” right now in the industry. So it makes me confident in ALPP’s future seeing not only acquisitions in this field, but a clear path of cooperation and investment into the business in order to become a serious industry participant.
So, all in all, very exciting stuff and I’ll be following closely to see how all of this unfolds!
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DISCLAIMER – AT THE TIME OF WRITING THIS ARTICLE I HAVE A LONG POSITION IN $ALPP. THIS ARTICLE IS NOT FINANCIAL ADVICE AND IS INTENDED ONLY FOR EDUCATIONAL PURPOSES. I AM NOT A FINANCIAL ADVISOR. AT THE TIME OF WRITING THIS ARTICLE, PERSONS AFFILIATED WITH THE COMPANY ANALYZED ABOVE MAY BE PROVIDING MONETARY COMPENSATION AS MONTHLY PATRONS THROUGH MY PATREON. THIS COMPENSATION IS NOT PROVIDED IN RETURN FOR ANY SERVICE, WRITING ABOUT A PARTICULAR TOPIC, AND/OR FAVORABLE OR UNFAVORABLE OPINIONS. MY PATREON SUPPORTERS HAVE NO INFLUENCE ON THE CONTENT OF MY ARTICLES.
1 thought on “ALPP Analysis – RCA Batteries Joint Venture”
Great article, Sam. Great read as always.