Hydrogen fuel cell stocks helped to power the stock market higher in 2020. Over the course of 12 turbulent months of trading, shares of:

  • Ballard Power Systems (NASDAQ:BLDP) jumped 226%;
  • Bloom Energy (NYSE:BE) soared 284%;
  • FuelCell Energy (NASDAQ:FCEL) rocketed 345%; and
  • Plug Power (NASDAQ:PLUG) blew all of the above away, notching a 973% gain.

Over the same time span, the S&P 500 was up only 16%.

Now don't get me wrong. 16% is a very respectable performance. (On average, the S&P 500 only rises about 10% per year). But as well as the broader market performed, the fuel cell stocks did far better.

This run-up in the share prices of fuel cell stocks didn't go unnoticed by investors, who have continued to bid up the sector in the New Year, betting on a continuation of the trend. And Wall Street analysts are definitely paying attention. At last report, S&P Global Market Intelligence data was showing the four major fuel cell stocks garnering a total of 20 separate "buy" or "outperform" ratings on Wall Street -- and only a pair of "sell" or "underperform" ratings. But investors and analysts aren't the only folks who have noticed that fuel cell stocks are receiving rich valuations these days.

The fuel cell companies noticed, too -- and they're making hay while the sun shines.

Cartoon man in glasses and suit stands in a pile of money and tosses $100 bills in the air

Image source: Getty Images.

Time to cash in

And by "hay," I mean "cash." Over the past six months, three of the four big fuel cell stocks have created and sold a combined $2.1 billion worth of new stock. Specifically:

Alone among the fuel cell stocks, Bloom has not conducted any follow-on stock offerings to cash in on its skyrocketing share price. Yet. 

The pluses and minuses of cash grabs

So should investors worry that the stocks they've been bidding up are now selling shares "at the top"? Well, maybe yes, but probably no.

Seeing a high-flying stock that you have been buying turn around and sell its own shares at a discount can be a bit worrisome. When Plug announced its $845 million stock sale in November, for example -- and said an underwriter's "overallotment option" could grow the stock sale to nearly $1 billion in size -- I pointed out how this would dilute shareholders out of 10% of their ownership stake in the company.

And shareholder dilution is a concern in such cases. But consider the advantages of these stock sales. When Plug announced its sale at a price of $22.25 per share, it got a lot more cash, and its shareholders suffered a lot less dilution, than would have happened had Plug sold shares back in, say, June 2020 -- when each share of Plug fetched only $5. Far from a danger sign, "the top" can actually be the best time for a company to issue and sell new shares, and raise cash to fund its growth plans.

Would it have been even better had Plug waited to sell shares until this week, when its shares hit a 52-week high of nearly $73? Sure. But one of the reasons Plug's shares hit that peak in the first place (and one of the reasons both FuelCell and Ballard are similarly sitting near their 52-week highs), is because Plug (and FuelCell and Ballard) made hay while the sun shined, and shored up their balance sheets with cheap investor cash months ago.

Consider: After its share sales, Plug Power probably has something on the order of $1.4 billion or $800 million in net cash on its balance sheet -- enough cash to fund more than four years of business expansion at the company's recent cash burn rate of $186 million per year.

Ballard has done even better, loading its coffers with as much as $700 million in net cash -- enough to keep it solvent for more than a decade even if it continues burning cash at the rate of $46 million a year. And FuelCell now has $90 million in net cash -- good for a year at its $71 million burn rate.

The only question at this point is when Bloom Energy, with $1 billion in debt on its books, and $325 million in cash that it's burning through at a rate of more than $100 million a year, is going to announce its own stock sale to ensure it's not eclipsed by better-funded rivals.

With its stock trading barely $1 per share below its all-time high, Bloom Energy definitely should do that.