Plug Power (PLUG) stock tanked about 15% on Wednesday, at the time of writing, as the hydrogen fuel cell company announced a $375 million convertible senior notes offering, due 2033. The convertible senior notes private offering, with a 6.75% interest rate, is being made to qualified institutional buyers under Rule 144A of the Securities Act. PLUG stock fell amid concerns about shareholder dilution from the offering.
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Plug Power Announces Convertible Notes Offering Amid Challenging Times
Plug Power stated that it expects to grant the initial purchaser of the notes a 13-day option to buy up to an additional $56.25 million aggregate principal amount of the notes. The company intends to use about $243 million of the net proceeds from the convertible notes offering to fully repay the principal and interest on its 15% secured debentures.
Furthermore, Plug Power expects to use the remaining net proceeds to repurchase all or a portion of its existing 7% convertible senior notes due 2026, as well as for working capital and other general corporate purposes.
PLUG stock has declined 37% over the past month as investors remain concerned about the company’s lack of profitability and cash burn. Moreover, Plug Power’s backlog has been under pressure in recent quarters. The company is taking steps to improve its position and aims to be profitable by 2028. Management stated that the company is on track to achieve positive earnings before interest, taxes, depreciation, and amortization (EBITDA) by the second half of 2026.
Meanwhile, Plug Power is seeking to capitalize on opportunities in the artificial intelligence (AI) data center market. Earlier this month, Plug Power signed a non-binding Letter of Intent to monetize its electricity rights in New York and another location, and to collaborate with a U.S. data center developer. The company will work with the data center developer to explore providing back-up power and auxiliary solutions by leveraging its advanced fuel cell technology.
Is PLUG a Good Stock to Buy?
Given the ongoing challenges, Wall Street has a Hold consensus rating on Plug Power stock based on five Buys, eight Holds, and three Sell recommendations. The average PLUG stock price target of $2.95 indicates 61.6% upside potential.
