Hydrogen fuel cell technology partner Plug Power found a “material weakness” in its accounting. Naturally, the stock is surging Friday. What gives?
For starters, the identification of a weakness represents the completion of the company’s previously announced accounting restatements. Finishing up that process removes a big overhang on the stock. What’s more, the company’s cash is still all there. The restatements were never supposed to be about cash balances, but investors can’t know exactly what’s coming at them before the process is finished.
Plug (ticker: PLUG) stock is up 11.7% in midday trading Friday. The S&P 500 and Dow Jones Industrial Average, for comparison, are up 1.3% and 0.9%, respectively.
It’s a big move for Plug stock, but it only alleviates some of the recent pressure on the shares, which are still down about 67% from a 52-week high. Shares are down about 42% since management said they would restate results back on March 16.
The restatements had to do with the accounting for service contracts and the classification of certain costs, such as research-and-development spending.
The overall impact on reported numbers turned out to be tiny. That’s another reason investors are relieved. The total decrease in earnings per share is 13 cents over the past three years. That increases the company’s total loss by less than 6% over that span. (Plug isn’t profitable yet, and had logged losses in each of the past three years.) The total change in reported sales amounted to about a 2% decline.
“We pride ourselves on operating with integrity and transparency in everything we do, and we’re pleased to put this matter behind us,” said CEO Andy Marsh in the company’s news release. “As we anticipated, the required adjustments were non-cash and had no impact on our business operations or economics of our commercial arrangements.”
No change in cash might be the biggest relief to investors. Now they can get back to projecting the future of the hydrogen economy. Plug, and its peers, hope to offer a hydrogen-powered commercial vehicle. Such vehicles don’t emit carbon dioxide, a gas blamed for global warming.
Write to Al Root at [email protected]
