Why Plug Power Stock Just Popped
Key Points
Plug Power CEO Andy Marsh will hold an AMA on Reddit this afternoon.
The CEO will try to explain to shareholders why Plug needs more money.
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Plug Power (NASDAQ: PLUG) stock popped 10% through 10:40 a.m. ET Thursday. On Tuesday, Plug Power announced its CEO, Andy Marsh, will host an "Ask Me Anything" session on Reddit (NYSE: RDDT) this afternoon.
The hydrogen power CEO will answer questions ahead of the company's "Special Meeting" of shareholders, scheduled for Jan. 29.
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What will Plug say?
Plug's Reddit sesh is just hours away. Phones open at 2 p.m.
Marsh will argue for the company's plan to amend its charter to permit issuing additional shares. The company says this is necessary to "maintain operating flexibility, and continue executing its business plan." (It's necessary because Plug must sell shares to raise cash to cover its continuing budget deficit.)
This proposal was voted down at the Company's 2025 Annual Meeting, despite 84% support from shareholders who voted. (The measure failed to win a majority of the outstanding shares entitled to vote, however.) Now, Plug is warning that if it cannot issue more shares, it will need to conduct a reverse stock split instead.
Why?
Why must Plug reverse split its stock if not permitted to sell more shares? Well, a reverse split would keep the same ceiling on the total number of shares outstanding. But after the split, each share would fetch a higher price on the market.
Think of it this way: If I have 1 million shares costing $10 each, and can't sell more $10 shares, I might instead reverse split them 1-for-10. Now I have only 100,000 shares, but each costs $100. I also have the right to issue and sell up to 900,000 new shares at $100 per share.
One way or another, Plug needs cash. It also needs to convince shareholders to let it get it.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Reddit. The Motley Fool has a disclosure policy.
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