- Market value has plunged since announcing plan to sell shares
- Fuel-cell manufacturer raising cash to fund expansion plans
Hydrogenics Corp., a Canadian provider of fuel-cell power systems, lost $34 million in market value in the week since announcing a secondary offering of shares to raise about half that amount.
Hydrogenics priced a sale of 2.13 million shares at $7.75 each on Friday, the Mississauga, Ontario-based company said in a statement. The shares have slumped 32 percent since the sale was announced Dec. 7, dragging down its market value to less than $74 million.
Makers of fuel cells that convert natural gas or hydrogen to electricity through a chemical reaction have struggled to develop profitable markets. Many, including Hydrogenics, have financed their money-losing efforts by selling additional shares to investors. Hydrogenics hasn’t posted a profitable year since it first sold shares to the public in 2000 at $12 each and has raised a total of about $200 million through six stock offerings.
Hydrogenics Chief Financial Officer Bob Motz said he’s disappointed by the market’s reaction to the offering, and said it’s the right time to raise cash to finance growth. The company has an $80 million backlog of orders for systems that convert electricity from wind and solar farms into hydrogen, and has another $100 million in orders for fuel cells that make electricity from hydrogen, mainly at refineries in South Korea.
“We’re ramping up significantly into 2016 and beyond,” Motz said in a phone interview Friday. “All of these things are coming to fruition.”
After expenses the company will end up with proceeds from the offering of $15.3 million. That will help reduce near-term concerns about cash flow as the company seeks to fill recent orders, Jeffrey Osborne, an analyst at Cowen & Co., said in a research note Friday.
“This equity raise resolves our previous liquidity concerns regarding Hydrogenics’s ability to execute on the strong order flow that the company has received in the past few quarters and to reduce backlog,” Cowen said. “Despite an enhanced cash position, we are still modeling earnings before income tax, debt and amortization negative status until the third quarter of 2016.”
Hydrogenics fell 6.9 percent to $7.24 at the close in New York. The shares have fallen 46 percent this year.