Investors love catching a ride on a good secular theme. The theme for a Joe Biden presidency, at least so far, is all about alternative and renewable energy. Many stocks are garnering massive interest by retail investors, but the real money being thrown at these companies is large enough that it must include institutional assets as well.

One company that has amazed skeptics in the past week is FuelCell Energy Inc. (NASDAQ: FCEL). The stock had more than doubled from the end of last week before some late-day profit-taking on Wednesday took the gains down to only 23.7%. What’s interesting here is that there has been no formal news announcement.

This situation would be puzzling if the theme of alternative energy and renewables wasn’t so obvious. Let’s just say it is unusual to see companies have 150 million shares trade on a Tuesday for a 10% gain, and then see 229 million shares trade for nearly a 25% gain on no real news.

With what may look and feel like free money being handed out by Wall Street and Main Street for ideas, is it time for FuelCell to raise some even more opportunistic capital?

FuelCell Energy makes stationary fuel cell power plants for distributed power generation. It also makes capturing systems that separate carbon dioxide from gases of natural gas, biomass or coal-fired power plants. Many investors have known about the company for years because it has a checkered trading history that actually dates all the way back to the early 1990s, and it was in existence for two full decades before coming public.

FuelCell now has a $1.5 billion market cap. Investors are overlooking a lot here because revenue of $60.7 million in 2019 was down from $89.4 million in 2018 and even further from $95.6 million in 2017. The company also lost money each year. Still, it is the hydrogen trade and clean energy that is attracting capital.

In its fiscal third quarter of 2020, FuelCell reported revenues of $18.7 million that were down from $22.7 million a year earlier. While its operating expenses decreased 16% to $7.6 million (from $9.0 million) a year earlier, the operating loss of $10.8 million compared with a prior-year operating loss of $1.1 million. While FuelCell claimed to have an order backlog of $1.33 billion, even that was down by $54.0 million year over year.

With the buzzwords of clean energy and the hydrogen economy behind it, perhaps FuelCell might want to look at a fresh capital raise. The company launched its Powerhouse business strategy in January of 2020 to grow and transform the company over the next three years. The company was even talking about sustained profitable growth. Refinitiv still sees a loss for 2020 and 2021, but it sees nearly 20% sales growth this year and 27% next year.

FuelCell has raised capital in the past, and it even did so earlier in 2020. The reason that yet another capital raise might be a good idea is that another hydrogen economy stock just raised capital after a massive run in the stock, and its stock was hardly even punished. Plug Power Inc. (NASDAQ: PLUG) has a $10 billion market cap, and after its stock closed at $25.00 on Monday, it announced nearly an $850 million capital raise by selling 38 million shares at $22.25. The stock was back above $24.00 on last look, as though the dilution doesn’t even matter because it gives it operating and growth capital for as far as the eye can see.

Plug Power is much larger than FuelCell. And it is growing, with 2019 revenue up from $174.6 million in 2018 and $133 million in 2017. The Refinitiv consensus estimates call for $319.6 million in 2020 revenue, going to $438.7 million in 2021. Still, Plug Power is expected to post operating losses each year, and its history has been a longstanding trend of operating losses. Plug Power has been public since 1999.

The question now may not be whether FuelCell should raise new capital. It may be if it can raise capital again.

The company already issued 25.1 million new shares of common stock a quarter earlier in 2020 in its “at the market offering program.” Those shares were sold at an average price of $2.56 per share, and it raised $62.3 million after deducting commissions. After the July 31 cut-off date of the last report, FuelCell issued an additional 3.2 million common shares in that program for additional proceeds of $7.8 million. The company had raised a total of $70.1 million in those two offerings.

More recently, FuelCell announced on October 7 that it has successfully raised $177.35 million in gross proceeds from multiple equity offerings from its at the market program and from underwritten offerings. That was after a September 29 capital raise of $91.3 million after selling 43.5 million shares at $2.10 per share. That offering was then finalized at just over 50 million shares after the overallotment, and it raised $105 million in gross proceeds.

Where this story gets more interesting is that JPMorgan, which was the first-named underwriter in September’s underwritten offering, just today downgraded this stock to Neutral from Overweight based on valuations. Despite a rerating of alternative energy stocks on the back of a Biden presidency, the analyst still sees good fundamentals and thinks FuelCell Energy is headed for profitability 2020. This same analyst had issued an Overweight rating and a $3 price target on October 8.

While JPMorgan specified that this is not a call to sell the stock, it sees better opportunities elsewhere. When you add up all that caution and concern, did it crush the stock? It was up 12% at $5.72 on last look.

Some of FuelCell’s cash is restricted. That is pledged as performance security, and a prior press release noted that the capital is reserved for future debt service requirements, as well as for letters of credit for certain banking requirements and contracts and reserved to pay down the Orion Facility. Other details were offered up, but what creditors often do not care about is if the prior shareholders get diluted to have cash to pay off debt after a stock has risen so much. The company also has preferred shares and has used its credit facility before to pay down debt and to fund dividends for those preferred shares.

FuelCell would be in a different situation for potential capital raises if the market and trends had not gone its way. It likely would be unable to access more capital had its stock fallen rather than risen. The company has even fought off a short-seller report that had claimed some contracts had been lost, and after refuting the allegations the shares jumped from $1.92 to $2.16 the next trading day.

When you add everything up here, particularly if the market is willing to reward companies for dilution, FuelCell would be smart to raise more capital opportunistically with a straight stock offering. The state of the market likely would not even demand that FuelCell would need to enter into a convertible debt deal, and that would mean that the company would not have more liabilities in case it cannot convert the shares if the stock price were to fall again in the years ahead.

If FuelCell was far enough along financially to be able to pay common stock dividends, the dilution argument versus free money would not be very valid. It is impossible to know what the future holds, but based on a history of growth companies, there is unlikely to be a discussion of a dividend here for even a decade out. While an offering might make a dent in the stock on the announcement, the new waves of investors just do not seem to care, and they even seem to reward many companies for being opportunistic.

FuelCell Energy stock traded up 12% at $5.72 Thursday morning. Its 52-week range is now $0.48 to $5.90, after the high was hit earlier in the day. Its market cap is about $1.7 billion.

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