Why ESS Tech Stock Crushed the Market on Tuesday

What happened

On a generally gloomy Tuesday for the stock market, ESS Tech (NYSE:GWH) was a bright light. The next-generation storage solutions manufacturer saw its share price leap by almost 7% following the details of a direct equity investment by a heavyweight business partner. In sharp contrast, the benchmark S&P 500 index -- which includes said partner as one of its component stocks-- tumbled by 1.5%.

So what

That partner is no less an industrial sector titan than Honeywell (NASDAQ:HON). On Monday, ESS Tech announced that it and Honeywell are collaborating to advance the development and implementation of the iron flow battery storage solutions the former company specializes in.

The icing on that cake was that Honeywell also directly invested in ESS Tech. At the time, the level of this investment was not divulged.

That changed after market hours. In a regulatory filing, Honeywell disclosed that its stake -- purchased by a subsidiary, Honeywell ACS Ventures -- totaled just under 16.5 million ESS Tech common shares. The company also purchased warrants entitling it, under certain conditions, to purchase an additional stack of nearly 17.7 million shares.

That share purchase alone makes for a considerable pile, as according to data compiled by Yahoo! Finance, ESS Tech currently boasts slightly under 155.6 million shares outstanding. Honeywell, then, now directly holds almost 11% of that total.

Now what

Honeywell is a company whose success has relied greatly on innovation and a knack for finding advanced technology that'll pay off handsomely in the future. In other words, this is a company that generally knows a promising piece of tech when it sees one. The company's double-digit percentage stake in ESS Tech is considerable, showing that this very well-capitalized company is ready to run with its partner's solutions.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends ESS Tech. The Motley Fool has a disclosure policy.