FuelCell Energy, Inc. (NASDAQ: FCEL) is doing its holders a real disservice after announcing a proposed share sale offering last night.  The company makes high-efficiency, ultra-clean power plants using renewable and other fuels. It actually might be one of the small-cap alternative energy winners out there.  The problem is that it is embarking on a secondary offering that comes at a very inopportune time and at a steep cost for anyone holding the stock before this offering priced.

The company sold 24 million in a public secondary offering this morning.  The $1.25 per share price raises about $30 million gross for the company, or about $28 million after fees.  Lazard Capital Markets is the sole book-running manager; Canaccord Genuity Inc. was co-manager.   It could bring in additional gross proceeds of close to $4.5 million if its overallotment option is exercised in full.

The problem is that FuelCell is doing this capital raise when shares are at a 52-week low.  The stock closed at $1.50 yesterday, and this is almost a 17% discount to that low.  The high of the last year is $4.61.  Looking at the stock’s chart shows that $1.50 is actually a low not seen in five years.

FuelCell Energy plans to use the funds for product development, project financing, expansion of manufacturing capacity, and general corporate purposes.

Before the effects of this secondary, the market cap was listed as almost $128 million.  Thomson Reuters expects the company to have 2010 and 2011 revenues of about $74 million this year and $142.4 million next year.

Raising capital for a company of this size is not unusual.  Management should have just used a little more foresight here and not punished their already suffering shareholders.  The company had more than $27 million in cash and short-term investments and almost $27 million more in longer-term investments.  It carries little long-term debt.

If FuelCell really needed this cash, this would likely have been known for some time.  Management should have done this at a more opportune time.

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JON C. OGG

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