Shares plug power (PLUG) – Get report fell on Wednesday after institutional investor Kerrisdale Capital announced a short position in the hydrogen fuel cell maker, which has risen to a valuation of nearly $ 40 billion in recent months.
In a letter announcing the short position, the investment manager of New York mentions Plug’s valuation while saying that the company will generate a “meager” income of $ 300 million by 2020.
The stock is trading at 20 times the forecast of Plug’s revenue for 2024, which Kerrisdale calls ‘aggressive’.
“But it’s all a pipe dream because ‘green’ hydrogen is too expensive and too inefficient to produce, store, transport and burn,” the firm’s letter reads.
“It’s not because of manufacturing inefficiencies or an imaginary S-curve that has yet to be scaled. It’s because of the physical laws, which we do not expect Plug to successfully defeat.”
According to S3 Partners, Plug’s short-term interest rate has risen by 16%, and the shares have risen by more than 1,400% over the past twelve months.
At the moment, Plug’s lone positive business segment is the hydrogen forklifts, which according to Kerrisdale are ‘almost comical’ given its valuation.
Despite the view that the forklift industry is not large enough to justify Plug’s valuation, the firm says that there is a total market of $ 30 billion and there are 1.5 million forklift purchases annually.
But hydrogen fuel cells are destined to cause loss of lithium-ion batteries, which, according to Kerrisdale, “have already proven their value proposition for forklifts and will quickly dominate the market.”
Kerrisdale also casts cold water on the partnerships Plug has signed over the past two weeks, calling them a sign of weakness rather than strength.
“These ‘big’ transactions need to be seen in the context of all the ‘big’ previous transactions that were never eliminated,” Kerrisdale said.
Plug shares with the last check fell 7.7% to $ 61.35.