Plug Power’s (PLUG), shares are down 15% after the announcement that $200 million worth of stock will be offered by the company.
Investors are questioning if this steep decline, caused by the issue of 79,000,000 shares at $2.54 per share, represents a good opportunity to buy.
The company is facing both political and financial challenges. But the question that remains, as it struggles with these issues, is whether Plug Power at this low price level makes sense? We’ll get into the details.
Plug Power’s financial maneuver
Hydrogen fuel cell manufacturers aims to raise 200 million dollars through public offerings, and plans to use the proceeds to fund general corporate needs.
It isn’t the first time Plug Power faced financial turmoil. The company had issued a warning about its inability to operate without extra funding last year.
Plug Power seemed to be turning a new corner earlier in the year. Investors were boosted by an agreement with B. Riley Securities, and the Department of Energy’s $1.6 billion loan.
The optimism of the DOE was quickly shattered by political controversy. This raised concerns over the DOE’s connection to the company.
Politics and finances
Plug Power has been further harmed by Senator John Barrasso’s investigation into the relationship between the company and Jigar Shah (director of DOE’s Loan Programs Office).
Shah’s involvement in a previous loan to Plug Power by a firm that had previously provided money has attracted attention.
Investor sentiment has been dampened by the political clouds and financial difficulties.
The announcement of Plug Power’s stock offer has raised questions regarding the company’s financial needs.
According to recent estimates, the company spent nearly $300 million on cash in the second quarter.
Plug Power’s financial stability may be threatened if this rate of burn continues.
Operating performance problems
Plug Power has also had a disappointing operational performance. It has missed sales targets and had disappointing gross margins.
The company faces a number of challenges that raise serious concerns regarding its ability to sustainably grow and achieve profitability.
Possible positive trigger: interest rate reduction
A reduction in the interest rate later in this year could trigger a positive outcome for Plug Power. A reduction in borrowing costs may improve Plug Power’s ability to secure additional funding on more favorable terms.
This potential upside depends on the ability of the company to improve its performance in terms of operations and show that it is not an issue with operational efficiency, but rather a shortage capital.
Long-term concerns
Plug Power shares have steadily increased in price, fueling speculation that the company will announce a solid Q2 report on August 14.
The context of recent public stock offerings dampens bullish feelings.
The company has not resolved its fundamental problems, and shareholders have faced significant challenges in the last three years.
Plug Power’s lack of operational improvement and high burn rate cash pose significant risks.
The company may face serious financial problems if these issues continue, and it could drive itself as well as its investors into ruin.
Plug Power should be approached with caution, despite the fact that its recent offering of stock has opened up a new entry point for potential investors.
Investments are highly insecure due to the company’s operational and financial challenges.
Plug Power investors should monitor closely the Q2 earnings and interest rate developments, since these factors have a significant impact on future Plug Power prospects.
The post Plug Power stock drops 15% after $200 Million Stock Offering: Should You Buy? This post Plug Power plummets 15% amid $200 million stock offering: Should you buy? appeared first on ICD
