DeZwarteRidder schreef op 19 november 2020 09:06:
Plug Power Insiders Cash Out On ESG Euphoria
Nov. 17, 2020 3:20 PMPlug Power Inc. (PLUG)
Summary
We believe Plug Power is incorrectly positioning itself as an ESG company in an effort to capitalize on the ESG movement. Insiders have sold $106m of their stock YTD.
Our research shows how revenue growth from Amazon & Walmart is unlikely to persist and is a costly subsidy for PLUG shareholders.
Without the subsidized Amazon & Walmart revenue, the underlying business is actually declining -52% yr/yr.
Plug Power is an old “story stock” with a flawed business model that dates back to 1999 and a CEO with a history of broken promises.
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The ESG investing movement is a powerful force in the capital markets and a positive influence on society at large. We believe Plug Power (ticker: PLUG) incorrectly presents itself as an ESG company in an effort to capitalize on the current ESG movement. Our report will highlight how Plug Power is failing at two of the ESG tenets – Sustainability and Governance.
The stock has rocketed up +700% over the past 12 months, but we worry that most investors caught up in the euphoria have little knowledge of Plug’s history. Our research indicates this stock price boom is based on revenue growth that is unsustainable and likely to reverse. Our research shows how the revenue growth propelling the stock is actually a costly subsidy to Amazon and Walmart at the expense of PLUG’s shareholders. We see the stock falling back to earth in 2021 as the revenue from these two main customers declines. We think investors could lose -75% as the stock makes its way back to our fair value estimate of $5.70 per share.
We don’t publish our research often, especially on the short side, but we would highlight our last published bearish report was on Akorn Pharmaceuticals, which declined -100% and filed for bankruptcy since our report was published 11 months ago.
Our Plug Power report will highlight the following areas of concern:
An unsustainable business model dating back to 1999.
Subsidized revenue growth strategy that is not understood by investors.
A long history of extreme equity dilution.
Reliance on 40 year old technology that is non-proprietary with limited commercial applications.
Massive insider selling across the Company.
A management team with a history of failing to meet guidance provided to investors.
A valuation detached from reality
An unsustainable business model built on selling equity and 40 yr old technology
For a company that so heavily promotes the idea of sustainability, we find it ironic that Plug Power has such an unsustainable business model. Plug Power is an old “story stock” with a flawed business model that dates back to 1999. Every few years, investor enthusiasm for alternative energy creates the perfect conditions for the stock to go parabolic. The only problem is that the management team never delivers on its revolutionary vision for the future and the stock comes crashing back down to earth. We’ve seen this boom/bust cycle play out in 2000, 2011, 2014, and now today.
We believe Plug Power has a fundamentally flawed business model. Over the past twenty years, the business has never generated positive free cash flow, rather it has burned $1.1 billion of investor capital. In fact, Plug Power has reported negative gross margins in 15 of the past 20 years. 22 years into this business, Plug still struggles to sell its product for more than it costs to make it. This flawed business model is kept alive by nonstop equity raises, which we will discuss in more detail later.