ESS Tech has entered into agreements for a $3.2 million registered direct offering and concurrent private placement as the non-lithium energy storage company raises additional capital for working capital and other general corporate purposes. Under the agreements, institutional investors will purchase approximately 6.4 million shares of ESS common stock at a price of $0.50 per share.
The sale of the common shares is expected to generate approximately $3.2 million in gross proceeds before deducting placement agent fees and other transaction-related expenses.
Alongside the registered direct offering, ESS will issue warrants through a concurrent private placement, allowing participating investors to purchase up to approximately 12.8 million additional shares of the company’s common stock.
The warrants will carry an exercise price of $0.50 per share, matching the purchase price of the common shares sold in the registered direct offering.
The warrants will become exercisable after ESS receives the required stockholder approval and will expire five years after their issuance.
If all of the warrants were ultimately exercised for cash at the stated $0.50 exercise price, they could potentially provide ESS with up to an additional $6.4 million in gross proceeds. However, future warrant exercises will depend on several factors, including the company’s share price and satisfaction of the applicable exercise conditions.
The approximately $3.2 million of gross proceeds announced with the transaction relates to the immediate sale of the common shares and does not include any potential future proceeds from warrant exercises.
ESS plans to use the net proceeds from the financing, together with its existing cash resources, for working capital and general corporate purposes.
The additional capital provides ESS with liquidity as the company continues developing and commercializing its long-duration energy storage technology.
The deal is expected to close on or around August 21, subject to customary closing conditions. And the financing combines two securities structures. The company is selling the common shares through a registered direct offering, while issuing the warrants separately through a concurrent private placement. Registered direct offerings allow public companies to sell registered securities directly to selected investors rather than conducting a broader underwritten public offering.
Since the warrants require stockholder approval before becoming exercisable, investors will not be able to exercise them immediately following completion of the transaction.
The five-year term gives warrant holders a relatively long period to exercise the securities if the applicable conditions are satisfied.
ESS develops long-duration energy storage technology based on non-lithium materials.
The company’s technology is designed around widely available materials as an alternative to energy storage systems dependent on lithium-ion battery chemistries.
Long-duration energy storage systems are intended to store electricity for extended periods and release that power when it is needed, potentially helping electricity grids accommodate increasing amounts of intermittent renewable generation.
As renewable energy resources such as solar and wind account for larger portions of electricity generation, grid operators and energy customers may need storage systems that can shift electricity from periods of abundant production to periods when generation is lower or demand is higher.
Long-duration storage technologies are being developed to meet some of those requirements, particularly for applications where storing electricity for longer periods may matter more than the characteristics associated with shorter-duration battery systems.
ESS is pursuing this market with technology that avoids reliance on lithium as its primary storage chemistry.
The company’s use of widely available materials is intended to provide an alternative approach as energy storage developers evaluate issues involving raw-material availability, cost, supply chains and the performance requirements associated with large stationary storage installations.
Stationary energy storage has different requirements from electric vehicles and consumer electronics.
Weight and compactness can be particularly important for mobile battery applications, while stationary storage projects can place greater emphasis on operating life, safety, cost, material availability, and the ability to repeatedly charge and discharge over long periods.
This creates opportunities for a range of battery and energy storage chemistries rather than a single technology serving every application.
ESS is seeking to establish its non-lithium platform within this broader market as utilities, project developers, governments and commercial customers invest in technologies intended to improve grid flexibility and reliability.
Commercializing new energy storage technologies, however, can require substantial capital.
Companies must fund research and development, manufacturing capabilities, product deployment, customer projects and other operating expenses while working toward greater commercial scale.
The latest financing gives ESS additional working capital to support these activities.
The relatively modest size of the immediate $3.2 million equity raise also means any future warrant exercises could become another source of capital if the warrants become exercisable and holders elect to use them.
At the full exercise price, the potential $6.4 million associated with the warrants would be twice the amount of gross proceeds generated by the initial common stock sale.
Those proceeds are not guaranteed, and warrant holders generally have greater incentive to exercise when the market value of the underlying shares exceeds the exercise price.
The financing therefore gives ESS immediate liquidity while creating a potential future capital source linked partly to the company’s stock performance.
The offering also results in additional equity issuance, meaning existing shareholders could experience dilution from the 6.4 million shares being sold and potentially from the additional 12.8 million shares underlying the warrants if those warrants are ultimately exercised.
For ESS, the tradeoff is access to new capital to continue operating and advancing its energy storage platform.
The company is raising the funds as long-duration storage attracts increasing attention as part of the broader transition toward more flexible electricity infrastructure.
Storage technologies can play an important role in balancing supply and demand, supporting renewable energy deployment and providing electricity during periods when generation from variable resources is limited.
Different storage technologies are likely to compete based on characteristics such as duration, cost, efficiency, operating life, safety and scalability.
ESS is positioning its non-lithium technology around applications where long-duration storage and material availability are important considerations.
Support: Roth Capital Partners is serving as the exclusive placement agent for the offering. Wilson Sonsini Goodrich & Rosati is serving as legal counsel to ESS in connection with the transaction, while Pryor Cashman is advising Roth Capital Partners.
