Shares in Plug Power ((PLUG) – Get the report fell Wednesday after institutional investor Kerrisdale Capital announced a short position in hydrogen fuel cell maker, which has reached nearly $ 40 billion in recent months.
In a letter announcing the short position, the New York investment manager quotes Plug’s valuation and says that the company had “meager” sales of $ 300 million in 2020.
The stock trades at 40 times its sales forecast for 2024, which Kerrisdale calls “aggressive.”
“But it’s all just a pipe dream, because ‘green’ hydrogen is too expensive and inefficient to produce, store, transport and burn,” said the company’s letter.
“It’s not because of manufacturing inefficiencies or an imaginary technology S-curve that has yet to be scaled. It’s because of the laws of physics that we don’t expect Plug can successfully defeat.”
According to S3 Partners, Plug’s short stake is 16%, with stocks rising more than 1,400% in the past 12 months.
Currently, Plug’s only positive line of business is hydrogen-powered forklifts, which Kerrisdale says is “almost weird” given its rating.
Despite its stance that the forklift industry is not big enough to warrant Plug’s valuation, the company states that there is a total addressable market of $ 30 billion and 1.5 million forklift purchases annually.
But hydrogen fuel cells are likely to lose to lithium-ion batteries. Kerrisdale says they “have already demonstrated their value proposition for forklift trucks and will quickly dominate the market”.
Kerrisdale also throws cold water on the partnerships Plug has signed over the past two weeks, calling them a sign of weakness rather than strength.
“These ‘big’ deals should be seen in the context of any previous ‘big’ deals that never came about,” Kerrisdale said.
Plug stocks fell 7.8% to $ 61.28 on the last check.