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If you’re interested in the clean-energy movement, investing in Plug Power (NASDAQ:PLUG) might seem like a no-brainer. The company has significant government financial backing. Don’t consider investing in Plug Power stock until you have all the relevant information.
Just remember, this is a contentious election year and clean-energy firms like Plug Power are caught in the middle of heated debate. Without the government’s help, Plug Power’s financials will be problematic and the shareholders may be left high and dry.
Plug Power Stock’s Apparent Savior
Plug Power stock has performed very poorly over the past year and is also down year-to-date. Meanwhile, the stock market has done well overall.
Yet, a fairly recent event gave Plug Power’s struggling shareholders a much-needed shot in the arm.
Here are the details. Plug Power “received a conditional commitment” for a loan guarantee, which could be worth as much as $1.66 billion, from the U.S. Department of Energy’s Loan Programs Office.
This funding is earmarked to “finance the development, construction, and ownership of up to six green hydrogen production facilities.”
That news item prompted a single-day 24% rally in Plug Power stock, but the celebration didn’t last very long. Indeed, those share-price gains were gone just a month later.
Perhaps the market understood that there are no guarantees with a “conditional commitment.” That’s a problem, since Plug Power really needs that money.
Bear in mind that, at the end of 2024’s first quarter, Plug Power had $172.873 million in cash and cash equivalents. However, the company managed to incur a $295.776 million net loss during that same quarter.
Free Money for Plug Power? Not So Fast!
Furthermore, not only is this funding badly needed yet conditional, but it’s also a loan that would have to be repaid. This isn’t just a bunch of free money for Plug Power.
And, Plug Power might not even get to have that loan. As InvestorPlace contributor Samuel O’Brient reported, U.S. Sen. John Barrasso is launching an investigation into the Energy Department’s conditional loan arrangement with Plug Power.
It’s a complicated story, but Barrasso alleges that there’s a conflict of interest between the parties involved. As an investor, you could certainly choose to take sides in this investigation if you’re very risk tolerant.
Or better yet, you could just stay on the sidelines. As O’Brient sagely stated, Plug Power stock “is likely to continue struggling amid rising uncertainty” due to Barrasso’s regulatory probe.
Don’t Try to Make Millions With Plug Power Stock
I tend to agree with Truist analyst Jordan Levy, who is concerned about potential disruptions to the government’s conditional loan arrangement with Plug Power.
This issue, Levy warns, poses substantial risk to investors “given PLUG’s relatively tenuous financial positioning/large cash burn.”
So, Plug Power’s shareholders shouldn’t harbor millionaire-maker fantasies in 2024. Instead, it’s wise to steer clear of Plug Power stock and if you already own it, feel free to take profits you’re lucky enough to have any.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
