8/14/2023 0 Comments Plug stock offeringIt remains to be seen where these funds specifically will be allocated, but my guess is that the company will use a bulk of it to build out its Green Hydrogen vision and expand its exposure to the hydrogen transportation market - two things which will inevitably add more firepower to Plug Power’s already strong long-term growth narrative. The new funds from the equity raise will only give Plug Power more financial resources to execute on its long-term vision. Plug Power is still the leader in a hypergrowth industry with enormous long-term potential. In other words, forget the equity raise for a moment. That is, the Hydrogen Economy is still on the cusp of an enormous, multi-trillion-dollar tipping point (powered by shifting laws, falling costs, and improving technology) wherein hydrogen fuel cells will become the commonplace clean energy source in long-range, heavy-usage situations, like local transit, cargo, materials handling, and stationary.Īt the same time, Plug Power is still rapidly emerging as the unrivaled leader in this Hydrogen Economy, with its best-in-breed fuel cells that are already being robustly adopted in the materials handling industry and which are increasingly being applied to various other transportation and stationary end-markets. The reason PLUG stock will follow this typical “weak today, strong tomorrow” pattern is because the company’s long-term fundamentals remain unchanged and exceptionally robust. Plug Power Growth Narrative is Still Strong PLUG stock should follow this exact pattern. Stock consolidates around those levels, then shortly thereafter gets back into rally mode. Stock falls back towards the offering price. Company announces equity offering at below-market prices. Zooming out, then, I’ve found that when it comes to hypergrowth stocks and equity raises, there’s a clear pattern. To that end, well-run hypergrowth companies usually leverage equity raises to enhance their growth profile and boost the company’s underlying fundamentals. Doing so requires a lot of spending to attract customers, build brand awareness, develop technical advantages, and fend off competition. Two, hypergrowth companies do these raises because these companies are usually in the early stages of pioneering a new market category. This is a par-for-the-course move that’s entirely unsurprising. One, hypergrowth companies with soaring stock prices almost always take advantage of their market momentum to raise money via a favorable equity offering. Simple enough, right? Equity raises = bad news for existing shareholders.īut, that cursory analysis lacks context. So, even if the value of the company doesn’t change, the PLUG stock price should in response to this offering thanks to a bigger share count. Plug Power stock price equals the value of the company divided by the share count. Thus, the share count will rise to over 400 million. This new offering adds 38 million more shares into the mix. The diluted share count last quarter was around 370 million. Plug Power’s equity raise will do just that. Investors usually don’t like equity raises. Technically, what they amount to is dilution through new shares. Dilution Offset by Balance Sheet Firepower It usually results in near-term weakness, followed by some consolidation, and then a breakout higher. It’s par-for-the-course for hypergrowth companies with soaring stock prices to capitalize on their market momentum and issue favorable equity raises at below-market prices, giving them the funds to further enhance their growth profile. And if you’re worried about the stock dropping 7% in a day, don’t be. Naturally, in response to the news, Plug Power stock is falling back toward the offering price. The PLUG stock price at the time the offering was announced was north of $25. Specifically, Plug Power is selling 38 million shares of common stock to the public at $22.25 per share.
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