After a busy day of trading Friday, shares of electric-truck company Nikola (NKLA -3.96%) closed down 5.1%, hydrogen fuel cell company Bloom Energy (BE -3.93%) dropped 4.2%, and solid-state battery researcher QuantumScape (QS -1.73%) did worst of all -- down 16.5%.
What do these three companies have in common? Broadly speaking, they're all involved in the race to discover and perfect new forms of energy production and usage. They're also all supremely unprofitable.
That didn't seem to bother investors earlier this year. Despite its recent difficulties, Nikola shares are still up 80% over the past year, Bloom Energy gained 280%, and QuantumScape -- one of the most recent in a series of special purpose acquisition company (SPAC) IPOs -- increased 674%.
So why were these three stocks down today? Eliminating the obvious answers -- there have been no analyst downgrades in the last couple of days, nor were there analysts cutting price targets. In addition, none of the three companies released any negative news that would appear likely to discourage investors.
And yet, here's the thing about unprofitable companies like Nikola, Bloom, and QuantumScape: They still need money to operate, and if they can't get it one way (by selling stuff) they generally tend to get it some other way (taking on debt or selling stock).
If you haven't noticed, this latter option has been particularly popular in recent weeks, with unprofitable Chinese electric-car makers NIO, XPeng, and Li Auto all announcing large share issuances. (Even Tesla -- nominally profitable -- completed a $5 billion stock offering on Wednesday.) Before that, it was the fuel cell companies' turn -- with both Plug Power and FuelCell Energy raising money on the markets.
Given the recent spate of secondary stock offerings among other renewable energy companies, especially in the electric vehicle space, investors in high-flying Nikola, Bloom, and QuantumScape may be wondering if their stocks will be next to announce large, dilutive capital raises. And even if they don't, the fact that so many other, similar companies are deciding to raise cash at the same time has disturbing implications for these companies as well.
Basically, the feeling might be that alternative energy companies are raising cash by selling shares now for one of two reasons: On the one hand, they may not be confident they'll be able to earn all the money they need by selling products -- and so are electing to sell shares instead. Alternatively, they may think they can make money selling products -- but their stock prices have run up so high that it still makes sense to cash in now, by selling stock before their stocks fall back.
Either of these possibilities would be bad news for outside shareholders, of course, and I really can't blame investors for being at least a little bit nervous today.