·       Plug nosedives on $1 billion equity offering

·       The company has an established record of stock dilution

Plug Nosedives

Hydrogen and Fuel-cell producer Plug, or the notorious company with a serious track record of selling stock, does it again.

On Wednesday, the company announced a $1 billion capital raise through an at-the-market (ATM) offering; unsurprisingly, this caused the stock to tank 17% in after-hours trading.

The company announced in its recent SEC prospectus that it’s teaming up with B. Riley Securities. They plan to sell stocks worth up to $1 billion, which isn’t a one-time event. Sales will happen periodically, with B. Riley taking the lead as the sales agent.

Of course, this stock has been a mess for a while. It is down over 80% in the past 12 months and around -40 % since the start of the year.

Look at the incredible cash-burning rate at which the company is operating.

Source: ycharts, macrotrends

Losses are piling up, and PLUG’s operating cash flow is increasingly negative. This has caused the company’s cash and cash equivalents to shrink constantly over the last several quarters and are in danger of going negative if the trend continues.

Management uses the company stock to fund the endless cash hole. In a sense, the product seems to be the stock.

Fundraising issues are not new. The fuel cell company had announced a “going concern” issue in November of last year, meaning it will not have the cash to fund the business.

Serious dilution track record

Plug faces hard times. A testament to the many reverse splits the company has undergone to remain listed on the Nasdaq is that its price was once north of $1500 split-adjusted during the dot-com bubble, compared to the current price just below $3.

Equity offerings via ATM or other equity mechanisms, followed by reverse splits to keep PLUG’s share price above $1 and fund its operating business, is nothing new. The company often uses that mechanism to stay afloat, diluting shareholders in the process.

The company is authorized to issue 1.5 billion shares, with the current number being 625m; hence, there is a long way to go regarding future equity offerings.

Investors can long Plug using our 1x Plug Power.

Alternatively, investors can short Plug using our  -1x Plug Power.