Plug Power (NASDAQ: PLUG) stock witnessed its most significant surge in three years after the hydrogen company announced its proximity to securing a $1.6 billion loan from the US Energy Department. Simultaneously, the company revealed plans to reduce spending as part of efforts to strengthen its balance sheet.
Plug Power (PLUG) surged by up to 31% on Tuesday, marking its highest intraday gain since January 2021, following the release of its annual business update. The Latham, New York-based company announced the commencement of operations at its electrolyzer production plant in Georgia, with another facility in Tennessee anticipated to open soon.
On Monday, the company was notified that the credit review board is assessing its application for vital government financing crucial to its growth plans. The interest rate is capped at 6.5%, and Plug Chief Financial Officer Paul Middleton said he expects it to be finalized by the third quarter. The company plans to use the money to support as many as six hydrogen production facilities.
Middleton acknowledged the importance of this lower-cost capital during the update call, saying,
“That lower-cost capital is incredibly helpful.”
The financing will contribute to the company’s long-term objectives. However, it currently grapples with a short-term cash crunch due to the rapid capital consumption in expanding its hydrogen production capacity.
November Earnings Shock
In November, the company shocked investors by reporting third-quarter earnings that fell short of expectations and warning of doubts about its ability to continue operations. On January 17, it revealed plans to sell up to $1 billion in stock.
Chief Executive Officer Andy Marsh said on the call,
“Addressing the critical issue of cash management and resolving our going concern is now our foremost priority.”
Colin Rusch, an analyst at Oppenheimer & Co., thinks that this issue might find a resolution in the upcoming months.
In a research note, Rusch wrote,
“Plug addressed key concerns, notably on balance sheet resilience, operational cash burn, and reaching critical technology performance benchmarks.”
He added,
“We believe the company will likely be able to address its going concern notice in the first quarter.”
Q4 Revenue Forecast
Furthermore, Plug Power (NASDAQ: PLUG) announced on Tuesday that its fourth-quarter revenue is anticipated to be around $200 million, significantly lower than the $378 million analysts had predicted. The company could also take a non-cash goodwill impairment charge of up to $250 million. It plans to reduce cash spending by 70% from 2023, with decreased capital expenditure and lower inventory investment.
Middleton stated that while Plug Power (NASDAQ: PLUG) has received numerous financing offers, the company found the terms unattractive.
Plug Power (NASDAQ: PLUG) Stock Reaction
By Tuesday’s close, PLUG stock had risen by 31%, with a trading volume of 157.14 million shares, far exceeding the company’s daily average trading volume of 39.06 million.
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