Shares in Wilsonville battery maker ESS up 150% on second day of trading as day traders dive in

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Some big investors wanted no part of a small Wilsonville company with a new battery technology. But day traders are captivated.

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On its second day of trading, shares in Oregon-based ESS Tech soared – from $10.42 at Monday’s close to $26.28 Tuesday morning.

Nearly 55 million shares had traded by 10:30 a.m. Tuesday, up from just 3.1 million following the stock’s debut Monday. It appeared the small stock caught fire among day traders on the hunt for the next big thing.

It’s quite a turnaround for the company, which got off to a wobbly start on Wall Street last week. ESS went public through a special purpose acquisition company, or SPAC. That’s a publicly traded investment fund that merges with a private business, providing the company with investment capital and a Wall Street stock listing.

SPACs are a novel way for companies to go public. But ESS’ deal didn’t go smoothly. Most of the investors in its SPAC backed out last week, cashing out their shares for $10 apiece rather than accepting a stake in ESS.

Now that ESS has begun trading on the New York Stock Exchange, though, the company has apparently found favor among day traders. Shares got off to a slow start Tuesday but jumped 27% after CNBC posted a flattering article about the company, noting in its headline that one of Bill Gates’ investment funds owns a stake.

Several posts subsequently sprung up on the online discussion forum Reddit, popular among day traders, touting ESS and its association with Gates.

Shares soared Tuesday morning, climbing nearly 150%. ESS says will be at least a month before the small company is able to calculate its market value, but Tuesday’s strong trading suggests it will be well above the $1.1 billion the company had targeted.

There’s no definitive explanation of what’s driving ESS’ sudden spike in value. Driving forces may be the enthusiasm of small-time investors for newly public SPAC stocks and for clean-energy businesses.

Day traders, in other words, who are gambling on hot stock listings in homes of a big payday.

ESS says its technology could store electricity generated by solar and wind farms for periods when the sun isn’t shining and the wind isn’t blowing.

The company has just 165 employees and forecasts just $2 million in revenue this year. But projects sales of $37 million in 2022, $300 million in 2023 – and $3.6 billion in 2027.

Before SPACs, small, starry-eyed companies pitched their big dreams to venture funds and private investment firms who are accustomed to taking risks. Thanks to SPACs, such small businesses are now more easily able to make their case to retail investors.

It’s a two-edged sword, though.

Meme stocks often turn out to be fads, with their share prices fading badly over time. And public companies with inflated share prices may come under pressure from short sellers betting that the stock will fall, or from attorneys who accuse such companies of making unrealistic promises and failing to deliver.

That’s what happened to Eugene electric vehicle manufacturer Arcimoto, which has been plagued by short-seller attacks and investor lawsuits. Its shares, which were trading above $36 in February, are selling for under $11 now.

Large, publicly traded companies have their own lawyers and investor relations departments to deal with such ups and downs. It’s tougher for small businesses, though, which must answer to shareholders every quarter and fund their legal and corporate offices with modest revenues.

That doesn’t mean trendy meme stocks can’t ultimately succeed as businesses. But sometimes, being a public company makes success more complicated.

— Mike Rogoway | | twitter: @rogoway | 503-294-7699

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