What happened

Shares of hydrogen fuel cell company Plug Power (PLUG -5.17%) surged 5% in morning trading on the Nasdaq Thursday before turning tail and giving back all its gains -- and more. In 1:40 p.m. EDT trading, Plug stock is actually down nearly 2%.

So what happened?

Red stock arrow breaking up and showering down in pieces over a city below

Image source: Getty Images.

So what

Good news first. This morning, Plug Power announced that it is teaming up with British industrial powerhouse BAE Systems (BAES.Y 0.15%) to supply the latter with "hydrogen-based electric propulsion systems" for buses built by BAE.

Together, the two companies are promising "to offer transit operators in North America an all-inclusive, scalable system to reach zero emissions, providing required site, vehicle, and service solutions."

Plug is currently the most valuable (by market capitalization) fuel cell company on the planet, boasting nearly $17 billion in total market cap despite currently having literal negative revenues reported over the last 12 months. BAE, on the other hand, is a much larger company, with more than $19 billion in trailing-12-month sales -- but a market cap barely bigger than Plug's at $22.3 billion.

Thus, this deal appears to offer both players something of benefit -- for Plug, a huge industrial partner to help commercialize and spread its fuel cell technology into new markets, and for BAE, a bit of Plug's fuel cell "sexiness" to add excitement to its own stock (which, to be perfectly honest, has languished, lagging the S&P 500's performance by a staggering 35 percentage points over the past year).

Now what

Of course, the bad news here is that as big as BAE is, it's not really best known for its bus business, which is so tiny it's nowhere broken out in the company's financial reporting. Rather, BAE is best known around the world as Britain's foremost defense contractor. Perhaps a tie-up with Plug's technology will change that and provide some diversification for BAE's primarily defense business.

Given how quickly today's share price gains faded for Plug, however, it seems investors still have some doubts about how this will all work out.