Shares of fuel cell maker Bloom Energy (NYSE:BE) fell as much as 12.8% today after the company announced plans to sell convertible debt. But the stock recovered losses quickly and at 1:20 p.m. EDT on Thursday was down just 1.2%.
Management announced its intent to offer $135 million of convertible senior notes due in 2025. Details of the offering aren't clear yet, but the debt can be converted to cash or equity, which could ultimately dilute shareholders long term.
The funds will be used to pay down some of the 10% convertible promissory notes due in 2021, effectively reducing the company's short-term financial risk. And some of the funds will be used for ongoing projects that will drive the company's growth.
Bloom Energy is in a new phase of growth after announcing a shipping project and an electrolyzer that could create clean hydrogen fuel. That's exciting for this renewable energy stock, but it'll also be costly to scale up these businesses.
I think Bloom Energy has a bright future given the potential for hydrogen fuel to disrupt transportation and electricity markets. But it's also a long road ahead. Raising funds is probably a good move given the company is burning cash, but that can be painful for existing shareholders short term, which we are seeing today.