Shares of Plug Power (PLUG 13.55%) plummeted 20% in early trading on Wednesday and were still trading 15% lower as of 1:30 p.m. ET. The hydrogen stock has now dropped 45% in just one month, as of the time of this writing.
One of the biggest concerns appears to have come back to haunt Plug Power investors: liquidity and financial stability.
Image source: Getty Images.
Why is Plug Power taking on more debt?
During its third-quarter earnings release on Nov. 10, Plug Power stated that an improving cash burn and access to capital should be able to support its operations. Plug Power had just raised $370 million, after all.
However, hardly a week since its earnings week, and Plug Power has already announced yet another capital raise, this time of $375 million through convertible senior notes.
None of this looks good for Plug Power, especially since the company is not raising funds to invest in growth or even run its operations. It will use the bulk of the borrowed money to repay a portion of existing debt.
The latest round of capital raise has, unsurprisingly, spooked investors and is driving shares of Plug Power down, especially after their stunning run-up in recent months.
Is this an opportunity to buy Plug Power stock?
Other concerns are also weighing on Plug Power. The company made some big announcements in October, including a leadership change. Jose Luis Crespo is heading to replace Andy Marsh as CEO, effective March 2026.
NASDAQ: PLUG
Key Data Points
Plug Power's Q3 report, however, raised some pertinent questions. It reported a larger gross loss of $120 million compared to the year-ago quarter. Better margins are non-negotiable for Plug Power right now, but I don't think that's happening just yet. Also, in a surprising move that deviates from the company's plans so far, Plug Power will deprioritize in-house hydrogen production, at least in the near term, and reallocate capital elsewhere.
Plug Power stock may look hugely promising for the next five years, but I will conclude with something I have always said: challenges are aplenty, and a lot could go wrong with the company in between. Today was one such day.
