Plug Power (PLUG +7.11%) stock tumbled more than 17% in morning trading Friday after the fuel cell and hydrogen fuel production company announced the surprise sale of more than 78.7 million shares of stock in an effort to raise cash to keep itself in business.
As of 2:20 p.m. ET, shares are still down 13.7%.
NASDAQ: PLUG
Key Data Points
What Plug Power is selling -- and why
Plug Power closed at $2.92 per share last night, but the company said it will be selling its stock for just $2.54 per share, raising $200 million in new capital for the company. Management noted, however, that if demand is sufficient, it hopes to sell 11.8 million more shares -- so 90.5 million in all, raising its total cash haul to roughly $230 million before costs and underwriting fees.
Plug Power needs this cash because it is running out of money, and cannot generate cash from its underlying business to replace it. At last report, cash reserves totaled less than $173 million (versus $950 million in debt). And Plug Power burned through $1.6 billion in cash over the last 12 months.
Is Plug Power stock a sell?
And this story gets worse. According to data from S&P Global Market Intelligence, Plug Power has literally never generated positive free cash flow (FCF) since it began reporting financials back in 1997. While the analysts forecast the company may turn FCF-positive in 2028, that still leaves about four years of continuous cash burn Plug Power must survive -- and it doesn't have the cash to make it that far.
Nor will today's stock offering change that. Even assuming the maximum possible size of this stock offering, the $230 million that Plug Power might raise will cover less than two months' worth of cash burn for the company. And within just four months, Plug Power will be entirely out of cash again, and need to sell even more stock to stay solvent.
Investors who are selling shares today realize that...and it's precisely why they're right to be selling.
