Industrials

Plug Power Gets Foothold in Asia With $1.5 Billion Investment

After markets closed on Wednesday, hydrogen fuel cell maker Plug Power Inc. (NASDAQ: PLUG) announced its intention to form a strategic partnership with South Korea’s SK Group that is intended to become a joint venture by 2022. SK Group has made a definitive commitment to make a $1.5 billion investment in Plug Power with the goal of accelerating hydrogen as an alternative energy source in Asian markets.

SK Group will invest $1.5 billion in Plug Power, acquiring approximately 51.4 million shares at a per-share price of about $29.29. The investment represents a stake of approximately 9.9% in Plug Power. According to the announcement, the investment is the largest private investment in public equity (PIPE) deal of the past 20 years.

Among SK Group’s holdings, the best known is SK Hynix, the world’s second-largest maker of computer memory chips and the third-largest semiconductor maker in the world. SK Group is the third-largest conglomerate (by revenue) in South Korea. With 2019 revenue of $86.2 billion, it trails only Samsung and Hyundai.

In mid-March, Plug Power stock traded at around $2.50 a share. By early June the stock price had doubled, and by early July it had doubled again to more than $10. Shares closed at $35 on Wednesday and traded up more than 32% Thursday morning to $46.69, a new 52-week high.

The company’s share price rise began when investors began to pay more attention to hydrogen fuel cells as an alternative to battery-powered vehicles. Plug Power completed two acquisitions in late June, one a merchant producer of hydrogen and the other a hydrogen generator maker. In early July, the company was one of seven featured in our review of high-growth alternative energy stocks.

Plug Power CEO Andy Marsh said that SK Group’s investment “offers immediate strategic benefits to Plug Power to accelerate its expansion into Asian markets.” Citing the “complementary strengths of the two companies, Marsh added, “[W]e expect rapid growth and significant revenue generation from the joint venture that are incremental to our 2024 plan.”

The consensus price target on Plug Power stock is just $28.18. The company, which was founded in 1997, pays no dividend.