FuelCell Hammers Holders With Large Secondary Offering (FCEL)

FuelCell Energy Inc. (NASDAQ: FCEL) is taking it on the chin this morning on news that the company is raising capital.  A secondary offering of 20 million shares may sound like a huge offering, but the price was only at $1.50 per share against a prior close of $1.76.  The news is hammering holders because the stock is down almost 11% at $1.58 on only about 3.5 million shares.

While the average daily volume is 2 million shares and while this is technically very active in trading comparisons to most days, the fact that you have not seen over 10 million shares trade hands after 90 minutes implies that the stock was not just flipped for a 7% gain by the investors who got the stock at the offering price.  Yahoo! Finance lists the market cap without the impact of this offering as being about $222 million.

The net proceeds from the sale of the shares after all expenses is expected to be approximately $28.0 million and the underwriters were granted a 30-day option to purchase up to an additional 3,000,000 shares of common stock or roughly $4.5 million if exercised in full.  The use of proceeds is for growth capital and general corporate purposes.

Lazard Capital Markets LLC was the sole book-running manager; Stifel Nicolaus Weisel was the co-lead manager; and FBR Capital Markets was the co-manager for the offering.

What is interesting is that this comes on the heels of a strong move upward from under $1.00 to about $1.90 before the recent pullback.  This secondary hammered the buyers of recent days, but it looks to be very opportunistic by the company.  The problem that is underlying here is simple: If management believed this was going to be a $2.00 stock, a $4.00 stock, or a much higher priced stock, then it wouldn’t dilute the float at only $1.50 per share.

JON C. OGG