On April 27, 2017, FuelCell Energy (NASDAQ: FCEL) took everyone by surprise when it announced that it intended to raise USD 15.4 million in capital through an underwritten public offering. The net proceeds amounted to USD 13.8 million at USD 1.28 per share, meaning 15 per cent above current stock quotes. At the same time, it issued one-year warrants priced at USD 1.28 per share, exercisable at any time, and five-year ones at USD 1.60 per share, including the same option (convertible into shares). Both warrants account for 12 million shares each.
The raise is diluting the stock of existing shareholders to a considerable degree. But it also leads to the conclusion that the fresh capital and the one-to-be (option to exercise) could – theoretically – rake in about USD 50 million. The stock price would have to be way above USD 1.60, though, to make the scenario attractive to investors. Considering all of this, it would make sense to assume that, in addition to the other large available amounts of cash, capital was raised to finance part of a planned large-scale project – perhaps Beacon Falls? – so that the investors/initiators themselves would have a great interest in seeing the share price be pushed up, so that they could benefit from the warrants.
In short: I recommend that you look past the current situation and temporary price fluctuations and for possible signs of a deal. Consider Plug Power, where a capital raise had initially led to a slump in prices, but little later to a surprising turnabout.
Investors must understand that buying and selling shares is done at their own risk. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small and mid-cap ones, i.e., they do not represent stakes in big companies and the volatility is significantly higher. This article is not to be taken as a recommendation of what shares to buy or sell – it comes without any explicit or implicit guarantee or warranty. All information is based on publicly available sources and the assessments put forth in this article represent exclusively the author’s own opinion. This article focuses on mid-term and long-term perspectives and not short-term profit. The author may own shares in any of the companies mentioned in this article.
Author: Sven Jösting, written May 2017