What happened

Shares of hydrogen fuel cell pioneer FuelCell Energy (NASDAQ:FCEL) recovered off their (very low) lows of Wednesday to close the day down "only" 20%. It was a curious result -- and matters only grew more curious on Thursday. The stock kept climbing back from its declines, and as of 1:45 p.m., EST, was trading up by 5.3%.

So what

As you may be aware, FuelCell Energy effectively shot itself in the foot, stock-price-wise, on Wednesday, announcing plans to raise about $162.5 million in cash via a stock sale. But beyond issuing new stock, some company insiders will be selling a large cache of shares at the same time.

The announced sales cover a total of up to 39.7 million shares, divided roughly 63% to 37% between the newly issued shares (sold to raise cash for the company) and existing shares (sold by insiders to raise cash for themselves). It's a plan that has both good and bad aspects for FuelCell Energy and its investors.

On the one hand, existing shareholders will get diluted out of about 7.8% of their ownership interest in the company. This is bad. On the other hand, the company as a whole could become more valuable as the stock sale will provide it with almost enough cash to pay off its outstanding debts. This is good. In fact, I suspect it's the primary reason investors were feeling more optimistic about FuelCell Energy stock on Thursday.

Origami dollar folded into an arrow pointing up

Image source: Getty Images.

Now what

In describing its share-offering plan, FuelCell Energy clearly stated its intention to use the cash it raises "to repay all outstanding amounts under its Credit Agreement with Orion Energy Partners Investment Agent, LLC" and also "to pay the principal redemption price of and accrued dividends on preferred stock issued by one of the Company's subsidiaries and to repay other outstanding debt." Only after those debts are retired will funds left over be earmarked for operating costs.  

After that, all FuelCell Energy will need to do is overcome and reverse its 23-year-long money-losing streak so that it doesn't get itself back into debt again.