Here's Why Plug Power Stock Fizzled This Week

Plug Power (NASDAQ: PLUG) has been counting on increasing adoption of hydrogen as a power source. But it hasn't gone as planned. Another capital raise for the company prompted investors to sell the stock this week.

As of mid-morning on Friday, Plug shares have declined about 19% this week, according to data provided by S&P Global Market Intelligence. That's continued a staggering drop of about 45% over the last month, more than wiping out prior year-to-date gains.

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Lowering the cost of debt

Plug Power announced the pricing and completion of a capital raise through convertible notes this week. While the hydrogen fuel company has continued to report losses, the purpose of the debt offering wasn't to directly boost Plug's balance sheet. Instead, proceeds of the $375 million offering will be used to pay down higher-priced debt.

That's good news over the long term, but it comes at a price for existing shareholders. Dilution of those shareholders, along with the company's mounting losses, led to more investors selling Plug shares this week.

The company's underlying hydrogen business hasn't been giving investors much reason to buy, either. Third-quarter revenue of $177 million was only slightly higher than both the prior quarter and the year-ago period.

The company has said it will pivot its business, aiming to become "a globally scaled energy technology business" to enter new markets in the future. In the meantime, existing shareholders have been facing a sinking share price and further dilution. Some decided not to wait around for Plug's transition to take hold, exiting the stock this week.

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.