Shares of Plug Power (PLUG 1.26%) plummeted another 20.7% in February, according to data provided by S&P Global Market Intelligence. Continued concerns about the company's liquidity, which have driven its stock down by about 80% over the past year, weighed on the share price, and those worries overshadowed the progress the company made on its strategic plan.
Working to shore up its liquidity
Last fall, Plug Power warned investors that it might not have enough liquidity to last it through the next year. Those concerns continued to hang over the hydrogen stock last month despite its efforts to shore up its financial situation. In January, the company agreed to sell up to $1 billion in stock to investment bank B. Riley Financial in an at-the-market offering. The company also revealed that it was working to finalize a term sheet with the Department of Energy for a $1.6 billion loan facility.
Plug continued to take steps to improve its financial position last month. In mid-February, it announced a strategic expense reduction plan to save more than $75 million annually. The company plans to consolidate operations, adjust its workforce, and take additional steps to cut costs.
These efforts are starting to pay off. Plug Power revealed in early March that it now has sufficient cash and available liquidity to continue operating for the foreseeable future. Further, the company plans to take additional steps to strengthen its finances this year.
Plug Power's liquidity issues overshadowed some good news last month. The company completed its first customer fill of liquid green hydrogen at its recently completed Georgia plant. It also signed a new basic engineering and design package contract for another 500-megawatt electrolyzer in Europe, increasing its total to 4.1 gigawatts. Plug also started liquid hydrogen production at an existing plant in Tennessee.
Is Plug Power a buy after its latest plunge?
Plug Power now has the funding secured to execute its strategic plan, which could fuel significant growth in the coming years. Meanwhile, it plans to take additional steps to enhance its finances in 2024.
However, despite all its progress, the stock remains a risky bet. Its primary liquidity source will be selling additional shares, which will significantly dilute existing investors. That could keep its stock price down even if its financial results start improving. Meanwhile, it's not to the point where it is sustaining its business with internally generated cash flow. Because of these factors, Plug Power stock is too risky for most investors. While the company has tremendous promise, it might not deliver on that promise and create value for shareholders if it continues diluting them by issuing new stock at beaten-down prices.
