Plug Power
- Plug Power stock dropped over 7% Wednesday after Kerrisdale Capital announced a short position on its Twitter account.
- Kerrisdale said Plug has “overpromised and underdelivered for decades,” and argued the future “hydrogen economy” is a myth.
- In its tweet, the firm knocked retail traders on Reddit who have been bullish on the stock in recent months.
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Kerrisdale Capital revealed it is short shares of Plug Power on Wednesday in a tweet that caused Plug’s stock to fall some 7.5%.
Hydrogen fuel-cell solutions provider Plug has seen its valuation rise to $40 billion at its peak in early 2021 after languishing just above penny stock territory for years.
Now the Latham, New York-based company trades at an eye-popping 67x sales and 50x book value, according to data from Morningstar.
Bulls argue the stock is deserving of its new status based on the expected growth of the “hydrogen economy.” With a much faster refueling time than EV competitors, a long driving range, and low overall costs, many investors are confident Plug will see success going forward.
The market for Plug's hydrogen services is expected to grow at 14.24% over the next seven years. Still, the market was valued at just $787 million in 2019, according to data from Grandview Research.
In a tweet announcing the short position on Wednesday, Kerrisdale said Plug Power isn't a way to bet on an overhyped "hydrogen economy," but rather a "/r/wallstreetbets roach motel," alluding the Reddit forum popular among retail investors.
Kerrisdale argued the world would "never meaningfully use green hydrogen for energy," saying it is too "expensive and inefficient."
In a letter confirming the short position, the firm laid out its thesis saying the inefficiency of hydrogen as a fuel source, the difficulty of building infrastructure to support it, and a lack of safety were main concerns.
Kerrisdale also noted Plug Power pulled in a "paltry" $300 million in revenue in 2020 while trading at 40x its own "aggressive" revenue projection for 2024. Plug Power's revenue is also almost entirely derived from selling hydrogen-powered forklift systems, which is a "niche product" that is "destined for obsolescence," according to Kerrisdale.
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"Plug's enterprise value assumes with near certainty the successful propagation of a future "hydrogen economy" in which green hydrogen power fuels our cars, trucks, homes, and factories." Kerrisdale wrote. "Sadly, the laws of physics virtually guarantee that a large-scale hydrogen economy will never exist. It will always be more efficient, cost-effective, and safer to just use electricity directly."
Sahm Adrangi, Kerrisdale's CIO, appeared on the "Grizzle in the Morning" Youtube show to discuss his short position on Wednesday. Adrangi noted "technology around batteries is advancing faster than the technology around hydrogen fuel cells," and argued Plug Power has "overpromised and underdelivered for decades."
Plug Power boasts a market cap of $28.8 billion and trades around $61 per share.