Shares of alternative energy providers -- fuel cell stocks including FuelCell Energy (FCEL -4.78%), Ballard Power Systems (BLDP -10.23%), and Plug Power (PLUG -6.49%) -- collapsed in Wednesday afternoon trading. Through 2:30 p.m. EDT, FuelCell shares fell 7.9%, Ballard tumbled 8%, and Plug did worst of all, losing 8.5%.
But of the three, it looks like Ballard Power bears most of the blame.
Neither Plug nor FuelCell, you see, have any news of note concerning them on the newswires today -- no press releases, no analyst downgrades, not even so much as a tweak to price target. Late last night, though, after close of trading on the Nasdaq, Ballard announced plans to raise up to $250 million worth of common stock by conducting an "at-the-market" (ATM) equity distribution.
"At the Company's discretion," said Ballard, it will issue stock to sell on either the Nasdaq or the Toronto Stock Exchange at whatever price prevails on the market at the time. Any cash raised from the stock sales (minus a 2% commission Ballard will pay the investment banks helping it to sell the stock), the company intends to use "for general corporate purposes."
Ballard shareholders don't appear to be thrilled with this news. A $250 million stock issuance, assuming it's conducted in full, promises to dilute current Ballard shareholders out of about 6.5% of their ownership interest in the company.
Plug and FuelCell investors likewise seem unenthused -- perhaps worrying that they are next in line to see some significant stock dilution. (As well they might fear. Both Plug and FuelCell are fully as unprofitable as Ballard is. Both are in just as great a need of cash to fund their loss-making businesses.)
And yet, Ballard's move has a certain amount of logic to it -- and if Plug and FuelCell do decide to follow suit with stock issuances of their own, that wouldn't necessarily be a bad thing either.
Consider: Over the past 12 months, shares of Ballard Power stock have more than tripled in price, while Plug stock is up more than 550% and FuelCell shares have rocketed more than 750%
Now, none of these companies are currently earning profits on their own. It's basically a given, therefore, that at some point or other they'd have to sell stock to raise cash to keep the lights on and the doors open. And if you've got to sell stock anyway, it's much better to sell it at a high stock price that keeps dilution to a minimum, while raising the maximum cash possible.
This is what Ballard is doing today: selling stock when its stock is richly valued so that it may not have to sell even more stock at a later date, when its popularity has waned and its stock won't fetch as much cash. To me, that sounds like a good plan.
Maybe even a plan Plug and FuelCell should emulate.