Hedge fund takes on Ballard – the new stock market thriller?

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Stacks for commercial vehicles, © Ballard

Ballard Power’s stock recently came under pressure for not fulfilling all the expectations of market analysts. The last quarter of 2017 didn’t see a net loss of USD 0.01 but USD 0.02 per share. The net loss for the whole of last year was as much as USD 0.05, although on a non-adjusted basis. It means that despite a considerable leap toward breakeven in 2017, Ballard was still around USD 8 million in the red. Nevertheless, the outlook is bright, for fuel cells in general and Ballard Power in particular.

Total revenue in 2017 grew to USD 121.3 million, a 42 percent increase compared to 2016, while the company was able to raise the gross margin by another 6 percentage points to 34 percent. The year ended on a positive EBITDA of USD 3.3 million, making Ballard the industry’s only company to have had a positive one for all of 12 months. Cash reserves added up to a healthy USD 60.3 million. Backlog reached USD 221 million, of which USD 91.4 million alone is expected for delivery in 2018.

“So let’s drive on.”

Randall MacEwen, CEO of Ballard

Ballard announced several cooperation agreements and bookings in the first few months of 2018. When the company had its conference call about the last-quarter results, participants agreed that many more would follow.

Hedge fund puts stock under pressure

Ballard Power (Nasdaq: BLDP) has been the subject of an extremely negative report published by a hedge fund, which seems to have taken a strong interest in the company. The authors said that the company had made false or misleading statements about its strategy for the Chinese market. They claimed that the Chinese partners were far from reputable and that some fuel cell buses were not operational. They also zeroed in on the currently low number of hydrogen stations in China. The 2030 target is 4.2 million charging points and 3,000 hydrogen stations. Ballard responded immediately, stating that the report contained unsubstantiated claims and that the authors got the details wrong too.

I think this hedge fund is a short seller that wrote the document to prompt shares to fall and profit through buying back stock at a lower price level. That is exactly what happened, as the stock fell from more than USD 4 to under USD 3. On the other hand, the fund may regard Ballard shares as a long-term investment and use the negative news to cause the price to drop and purchase shares when they are traded at lower levels. Who knows. The long-term scenario is supported by the fact that only around 5 million of Ballard’s shares have been sold short, a miniscule number compared to a total of more than 170 million outstanding. In the meantime, several law firms have filed class action suits, since the price dip lost shareholders a lot of money. Ballard has taken measures to respond.

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Risk warning

Share trading can result in a total loss of your investment. 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 may experience high stock volatility. 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 content of this article reflects the author’s opinion only. This article focuses on mid-term and long-term prospects and not short-term profit. The author may own shares in any of the companies mentioned in it.

Written by Sven Jösting, February 2018

1 thought on “Hedge fund takes on Ballard – the new stock market thriller?

  1. Financial world use terrorist style attack to achieve their corrupted goal without any respect of the company and their teams. Not to mention the consequences fornthe community…they simply do not care…disgusting

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