A Catalyst for Cleantech
Silver Spring Networks (NYSE:SSNI) is a leader in smart grid technology. They provide a variety of innovative products including metering devices, in-home devices, and network infrastructure that are all integrated with the Silver Spring Smart Energy Platform. Silver Spring works with a variety of different consumer groups. They are partnering with Electric Vehicle (EV) manufacturers to integrate their Direct-to-Grid technology. They provide residential customers with energy efficient utilities options, and advanced metering technology to ensure efficient energy consumption. Silver Spring’s SilverLink cloud service is on the cutting-edge in providing utilities the opportunity to leverage smart grid data. By looking at real-time smart grid data, utilities can learn useful information about their system’s effectiveness, and implement this information in all facets of their operations.
Cleantech has been the “next big thing” for nearly a decade, but the last few years have seen a downturn in the success of public offerings from the sector. Silver Spring turned heads with a wildly successful IPO on March 13th, with the share price jumping up 29 percentage points from the initial offering of $17 to $21.89. Demand for stock was huge; they made an additional one million shares (for a total of 4.5 million shares) available because of oversubscription.
Leaders in cleantech hoped that this would be a catalyst for more successful IPOs and greater investment. 2012 saw a 33 percent drop in cleantech investment from the previous year, with the number of venture deals down 15 percent. Venture capital has been reluctant to put significant funds in the industry, only 16 of the 37 clean tech IPOs in 2012 were venture-backed. Unfortunately, the last month has seen Silver Spring slump, and barring a successful earnings announcement in May that fall could continue. Silver Spring is currently trading at $19.93, after a low point of $17.15 in late March.
Why has cleantech suffered in the past few years? In the latter part of the ‘00s, cleantech was seen as a huge growth opportunity. Government support for cleantech projects and a worldwide commitment to increased energy efficiency certainly seemed to be a good sign for investors. However, government support has its drawbacks. Many large cleantech companies require government subsidies and loans to build infrastructure and scale for their projects. Investors are wary that without this government support they would not be able to receive a healthy return on their investment. Smart-grid technology, solar and wind power, and many more subsets of the cleantech industry have felt the crunch as investment is becoming harder and harder to come by. Despite the drop in price over the last month, Silver Spring Networks could recover strongly if the earnings report is encouraging. Not only will this provide a good return for their investors in particular, but it could spur renewed confidence in the cleantech industry. Silver Spring Networks is a great stock to watch, but I would hold off on investing until after the earnings announcement.