Bollore’s E-Car Venture Leaves Investors on Side of Road

French billionaire Vincent Bollore’s push into electric vehicles has been a huge success, at least in terms of publicity and eye-catching contracts. For investors, it hasn’t worked out so well.

Shares of his battery company, Blue Solutions SA, have plunged by more than two thirds since peaking 2 1/2 years ago, wiping out 775 million euros ($823.5 million) of shareholder value. They now fetch less than they sold for in the Quimper, France-based company’s initial public offering in 2013.

Listing the business shined a light on Blue Solutions’ achievements — its novel lithium metal polymer battery presents no risk of overheating and explosion, contrary to lithium-ion models such as those in Samsung’s fire-prone Galaxy Note 7 phones. The downside: The batteries need to be kept warm, which mostly limits them to uses such as car-sharing services with charging stations.

Bollore’s car-sharing operations, which use Blue Solutions’ batteries, are losing money in every city in which they operate. And at a time when sales are surging for electric vehicles such as Tesla Motors Inc.’s high-end Model S, the billionaire has struggled to sell his cars to individuals.

“As times goes by, there are more doubts on Blue Solutions’ technology,” said Massimo Baggiani, the Turin, Italy-based manager of the Symphonia Electric Vehicles Revolution fund, which holds the shares. He said he sees no recovery “unless there is some kind of a new visibility on the stock, on the strategy.” Still, he’s holding the shares to give the management a chance to highlight the success of their business, and because electric cars are part of a fast-growing market, he said.

Blue Solutions’ IPO was aimed at gauging investors’ opinion of the technology, said Chief Executive Officer Gilles Alix. “If you’re a shareholder, you have to be patient,” he said in a phone interview. “It’s a long-term value, because batteries are a very, very long-term product which hasn’t totally found its market — but the potential is enormous.”

Bollore is both a patient investor and an adventurer. He has let his company spend more than 2 billion euros on a battery technology that’s yet to become consistently profitable.

The 64-year-old billionaire juggles many balls: He’s the chairman and co-chief executive officer of Bollore Group, and chairman and the biggest shareholder in media conglomerate Vivendi SA. With Vivendi, Bollore has launched raids on Silvio Berlusconi’s Mediaset SpA and video-game maker Ubisoft Entertainment SA, in both cases against the wishes of the founding families.

The electric-car project has earned Bollore plenty of headlines and a string of contracts to operate car-sharing services in Paris, Turin, Indianapolis and other cities, with batteries from Blue Solutions in cars developed by Bollore Group. The company also sells a consumer version of the Bollore car, vehicles for transit systems and energy-storage products.

Taxpayer Losses

Blue Solutions fell 1.6 percent to 11.89 euros at 10:40 a.m. in Paris, giving the company a market value of 342.9 million euros.

The French weekly newspaper Le Canard Enchaine reported this month that Autolib, Bollore’s Paris car-sharing service, is expected to have a 179 million-euro deficit by the end of the contract in 2023, of which two thirds will be assumed by taxpayers, since losses for Bollore are capped at 60 million euros.

Blue Solutions underestimated the development means required for Autolib when it was first created, Alix said. “It was so innovative that we didn’t know its cost,” he said, adding that “today everything’s under control.” The city of Paris imposed charging stations in the contract where cars are dropped off but aren’t being picked up by users, causing a lack of vehicles at more popular stations, he said.

“Around 200 stations are blocking the system and making us lose money,” out of a total of 1,100, he said. “I think we can make money on Autolib.” Bollore’s car-sharing service in Indianapolis is close to reaching break even, he said. Future installations in Singapore and Los Angeles benefit from large subsidies, Alix said. He added that he expected the Singaporean service to generate profit.

So far, cars equipped with the batteries also haven’t been a hit in the mass market. Bollore Group sold 942 vehicles to individuals in France in the first 11 months of 2016, down 15 percent from a year earlier, according to CCFA, the French carmaker lobby. PSA Group sold 725 of its Citroen E-Mehari convertible, a re-badged version of Bollore’s Bluesummer, in 2016. By comparison, Renault SA, the electric car leader in Europe, sold 21,735 Zoe electric cars in Europe last year and 3,901 electric Kangoo vans. 

“We will remain a reference in car sharing either by developing our own systems or selling licenses,” Alix said. The company is working with carmakers on vehicles that will be equipped with an improved battery, he said.

Drawing Power

One drawback for the batteries: The car consumes electricity even when it’s not running to maintain the battery’s temperature between 60 and 80 Celsius degree. That means either drawing down the battery or keeping it plugged in. “We are working on it and this issue won’t exist in two years,” Alix said.

Pierre Bosset, an analyst at HSBC Holdings Plc in Paris, said in a report in November that he doesn’t see Blue Solutions achieving the targets it set at the time of the stock market launch, including earnings before interest, taxes, depreciation and amortization of 50 million euros to 70 million euros for 2017. Rather, he forecasts 32 million euros. That compares with 21 million euros in 2015, when Blue Solutions generated 122 million euros in revenue.

Alix said that the company didn’t meet its volume guidance because the batteries last longer than expected — which is good for customers but means less demand for replacement batteries. Also, the electricity storage solutions it also develops are taking longer than expected, he said.

The convoluted nature of Bollore’s empire makes it difficult for investors to assess the outlook for Blue Solutions, because no one knows what its finances will look like next year. Bollore Group owns 89 percent of Blue Solutions. Alix said that about 90 percent of Blue Solutions’ batteries are sold to Blue Applications, which operates the car-sharing services and is entirely owned by… Bollore Group. Blue Solutions has options to buy Blue Applications from Bollore in several chunks by June 2018, though it’s unclear how much it will pay.

Financial Structure

Should Blue Solutions exercise the options, the price would be based on the valuation of a judge-appointed expert and a contracted battery price, according to a regulatory filing.

Blue Solutions’ structure would change dramatically with the exercise of the options, HSBC’s Bosset wrote. He’s among four analysts who follow the stock; none of them recommend buying the shares. Still, the company is “an impressive commercial and technical success story,” he wrote.

Baggiani said he understands the company’s losses. Investing in electric-vehicle technology means “you lose money in some companies and make big money with winners,” he said. The fund manager said he appreciates the availability of the company’s management.

“They told us they were ready to address all the issues during a phone call,” he said. He hasn’t heard back from them yet.

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