A recent company announcement from FuelCell Energy (NASDAQ:FCEL) has FCEL stock plummeting Wednesday. While the move should have investors paying close attention, it also speaks volumes about the recent rise in clean energy stocks. So what do you need to know now?
Before diving into the specifics of the Wednesday plunge, investors should be familiar with the recent FCEL stock narrative. Essentially, the company stands out for its work with hydrogen fuel cells. With more and more consumers prioritizing sustainability, alternate fuel sources like hydrogen have gained steam. Additionally, many see the upcoming inauguration of President-elect Joe Biden as a major upside catalyst. Why? Biden has promised to invest $2 trillion in clean energy infrastructure.
However, this narrative is not enough to protect FCEL stock from a major plunge. Here are 10 things you need to know to understand what is happening now:
- Investors likely know just how hot FCEL stock has been, particularly on a post-election catalyst.
- In fact, shares are up 290% since Election Day and 260% year to date.
- Shares closed out Tuesday, Dec. 1 above $9.
- However, a recent company announcement sent shares heading in the wrong direction.
- On Tuesday, FuelCell Energy announced a public offering for 34 million shares of its common stock.
- Importantly, more than 14 million of those shares are coming from specific company stockholders. That has many investors questioning why insiders are so intent on selling right now.
- Additionally, FuelCell will offer this common stock at $6.50 per share.
- This will bring $128.8 million in gross proceeds to FuelCell and $95.5 million to the selling stockholders.
- FuelCell Energy says it will use these proceeds to repay outstanding amounts under its credit agreement with Orion Energy Partners.
- This credit agreement funded the construction of fuel cell projects, increased the cash balance and helped provide dividends for stockholders.
Why FCEL Stock Is Plunging Today
Simply put, FCEL stock investors are panicking today.
After rising to new heights on the back of the presidential election and clean energy adoption, FuelCell Energy shares are crashing back down on Wednesday. Importantly, many investors are alarmed at the $6.50 offering price and the fact that FuelCell needs cash that fast. Factor in the 14 million shares comin from insiders, and it seems that everyone close to FuelCell is hungry for cash.
So what should you do right now? Although the news is alarming, it may not be as bad as investors think in the long run. FuelCell Energy is not yet profitable. This means that its recent announcement is a smart move to leverage recent strength and fix up its balance sheet. In the long run, that could set FCEL stock up for even more success. Right now, we are seeing the immediate aftermath of a big announcement that will bring short-term pain to the popular stock.
Additionally, the move lower in FuelCell comes as red-hot Workhorse (NASDAQ:WKHS) similarly sinks. Perhaps investors will see today as a reminder that as clean energy stocks rocket higher, volatility is always present. That does not mean the upside potential is gone, it just means you should stay calm and do your own research.
FCEL stock is down 26.4% as of this writing. FuelCell says the public offering should close Dec. 3.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.