Should you invest in Tropical Battery’s new offer?

So Tropical Battery is a company best known for selling, you guessed it, batteries. But over the past few years, they’ve evolved from being just a local battery distributor. 

They now operate in electric vehicles, renewable energy, and even have operations in the U.S. and the Dominican Republic.

Now they’re back on the stock market with a Secondary Public Offering, or SPO, also known as an Additional Public Offer, APO.

Tropical Battery is offering 954 million new shares, with the option to upsize to 1.12 billion ordinary shares. The price is $1.87 Jamaican dollars per share.

That’s a 10 percent discount on the trading price at the time the offer was announced. The company closed trading on May 27 at $2.16 so is still a good discount. 

If the offer is upsized and fully subscribed, Tropical would raise $2.1 billion JMD.

So what are they doing with the money?

Most of it is going to pay off debt that they took on to acquire Rose Electronics last year. Rose Electronics is a distribution company based in the famous Silicon Valley.  They provide energy storage solutions.

Since the acquisition, Tropical Battery’s revenue has nearly doubled from 2.8 billion in 2023 to 5.6 billion in 2024.  And they’re targeting over 7.5 billion in revenue this year, which would be the first full financial year with Rose on the books.

So it seems like that investment has been paying off handsomely.  Now CEO Alexander Melville said they want to pay off the loan to free up cash and improve profitability.  That’s what the APO is for.

Because although revenue is up impressively, profits have fallen, leading to no dividends being paid last year.  Net profit fell from 140 million in 2023 to just 20 million in 2024.  However, the company says this was largely because of the one-off acquisition costs, as well as high interest costs, which they’re looking to address by paying off the debt.

And let me just add, Tropical Battery is a company that’s in its prime growth phase. Apart from Rose, they also acquired a 51% stake in Kaya Energy, a renewable energy company in the Dominican Republic in 2023.  

Between those two acquisitions, as well as a number of local initiatives, Tropical Battery is positioning itself for rapid growth.  In fact, their ultimate goal is to eventually list on the NASDAQ stock exchange in the US.

But let’s talk about risks because every investment has them.

One of the biggest concerns that investors have is that this offer comes at a time when the Jamaica Stock Exchange is still recovering from years of volatility and low investor confidence.

Next, even though the company is expanding fast, there are always operational risks when breaking into new markets, which Tropical Battery has been doing. 

Now remember that this information is for educational purposes only, and is not intended as investment advice.

The offer is currently open and is scheduled to close on June 6, but if it is oversubscribed, it could close early. 

What do you think about this offer? Are you interested? 

If you are interested in the offer, you can apply through NCB’s goIPO platform or through Sagicor Investments eInvest.

Let’s get this money!