Plug Power (NASDAQ:PLUG) is among the green energy companies experiencing significant selling pressure today as broader market forces work against growth stocks. In this afternoon’s session, PLUG stock has declined about 13% on the news that the company is looking to raise additional capital.
The company announced that it expects to offer approximately 79 million shares to investors at a price of $2.54 per share. That’s significantly below yesterday’s close of $2.92. At the time of writing, PLUG stock is trading right around that offering price, which makes sense.
As a result of this offering, Plug Power should have around $200 million in additional capital to work with. The company has been looking to ramp up production and begin seeing the economies of scale many investors have been looking forward to for some time. However, Plug did not immediately provide a use for the funds in its initial announcement, stating that the funds would be used for general corporate purposes.
Let’s dive into this offering and what it may mean for investors.
PLUG Stock Sinks on Proposed Offering
For most companies looking to raise capital in the markets to a group of private investors, some sort of discount to market price is required to entice them in. Thus, today’s price action, which saw PLUG stock decline actually below the offering price, is certainly understandable.
That said, this discount implies to current investors that the big money isn’t scrambling to pick up shares near market levels. There’s risk with any investment, and having a margin of safety is a great thing. But when the market reprices an investment below where these investors agreed to step in, that’s not positive for those who just made this deal.
The hydrogen fuel cell space is hard to value, as it’s an industry that’s always been a year or two away from mass adoption for decades. Investors hoping for new life in companies like Plug Power via massive government programs such as the Inflation Reduction Act (IRA) haven’t seen much traction as of yet. And with cash burn remaining a concern for many companies in this sector, it’s clear that investor sentiment is not favorable right now.
We’ll have to see how this investment turns out. But today certainly doesn’t look like a great day to make such an announcement, given the price action we’re seeing in the overall market.
On the date of publication, Chris MacDonald 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
