FormerXBC Inc XEBEQ

PLUG The Bear Case

[ZouZS3]

The Bear Case Plug Power is in a bubble inflated by a collective mania on the part of relatively uninformed retail investors for anything that smells of the future, a bet that billions of subsidy dollars will somehow create a technology that generates not only super-clean energy but also positive free cash flow over the long run. Plug Power isnt worth half of what the stock market says. But you dont need to take my word for that. You can take the word of the companies who believe in it and who need and want it to succeed in order to succeed themselves, companies that have looked a lot harder at its technology and balance sheet than those squeezing the stock higher through the options market this week. SK Group, the Korean company that agreed to invest $1.5 billion for a 9.9% stake in Plug, did so at a price of $29.29 a share. In response to that very same news, retail investors were buying the same share at over $70 on Wednesday, and even though it gave up 4.3% on Thursday, its still trading at over twice what SK paid for it. The other strategic partnership announced in the last week is also very likely less than meets the eye. Sure, it has locked up a strategic partner for vans, a particularly promising vehicle segment, in a deep and broad market with abundant subsidies for green energy. On the downside, its Renault SA (PA:RENA) a French company unlikely to have a meaningful presence in either the U.S. or China, and which lags rivals such as Ford Motor Company (NYSE:F), Volkswagen AG (OTC:VWAGY) Pref ADR (OTC:VWAPY) and Stellantis (the new holding company for Peugeot (OTC:PUGOY) and Fiat Chrysler). Financial details of who will provide how much money for the JV and over what timeframe were conspicuous by their absence. Its true that the future that Plug Power has been promising for 20 years looks a more realistic prospect than at any time during its long, unbroken and glorious series of losses. And the company loses less money per share now than it used to, even if it is widening in absolute terms. But its valuation, at over 10 times trailing sales, is divorced from reality. Hydrogen remains the longest of long-duration tech bets. Any profits it makes in the next 10 years will be due to subsidies which look secure today but which many governments may struggle to sustain if there should ever be an increase in their borrowing costs. Unless your investment strategy is simply to raid the public purse, there are better and safer returns to be had elsewhere.