Plug Power (NASDAQ:PLUG) stock fell 25% in less than 24 hours after the hydrogen supplier announced a new offer of $1 billion in stock “at market.” That means the stock will be sold at the current market price.
Plug Power needs the money to stay in business. Hydrogen prices remain low, while Plug Power’s “green hydrogen” production process is expensive.
Plug Power fell 10% on Jan. 17 and another 18% overnight. It was due to open this morning at $2.26 per share, a market capitalization of $1.66 billion on 2023 revenue of $890 million.
Pull the Plug?
Plug Power began life making hydrogen fuel cells, finding a ready market in warehouse forklifts. The “pollution” created by fuel cells is water. Fuel cells also have a longer working range than batteries, which must be recharged regularly.
But the company’s decision to become a hydrogen producer is backfiring. While the idea of pulling hydrogen from brine drew investment, lower-cost alternatives quickly emerged.
Brown hydrogen can be produced from coal. Grey and blue hydrogen are created using natural gas. So-called pink, purple and red hydrogen are produced from nuclear power. There’s even white hydrogen, which can be pumped directly out of the ground.
The problem is that chemically, hydrogen is hydrogen. Hydrogen is a commodity, and suppliers compete on price. Plug Power can’t assure buyers today that a long-term supply contract won’t break them as cheaper supplies come online.
Plug Power has sought government help, but analysts are telling investors to stay away. Efforts at a short squeeze are guaranteed losers because the company can only raise new capital from stock sales.
Plug Power said in November it would have trouble remaining a going concern without new investment. It lost $284 million in the third quarter and was down to its last $110 million in cash.
PLUG Stock: What Happens Next?
Plug Power’s situation looks dire. The fuel cell business may be sound, but the hydrogen supply idea is a loser.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
