Plug Power (NASDAQ:PLUG) shares experienced a significant decline of 14% in premarket trading on Wednesday, as the company approaches a critical milestone in its liquidity strategy. The hydrogen fuel cell specialist is set to finalize the sale of its Graham, Texas, project by Friday, a deal expected to generate $50 million in cash upon closing.
The stock, which closed at $1.96 on Tuesday after a 4.9% decline, has fallen 13.7% over the past five sessions. This includes a 3.7% drop last week and an additional 6.2% decline through Tuesday. Trading volume surged to 82.3 million shares on Tuesday, the highest level during the five-day slide, indicating heightened investor attention.
The $50 million payment from the Texas asset sale represents 31% of Plug's estimated cash on hand as of June 30, which stood at $162 million. Combined with other deals in Texas and the first phase of a New York project, the company expects to generate over $80 million in short-term liquidity, amounting to at least 49% of its cash reserves. However, this figure appears modest compared to recent expenditures. Plug's operating cash usage reached $150 million in the first quarter, meaning the $80 million minimum covers only 53% of that quarterly cash burn.
Business conditions have shown some improvement. First-quarter revenue rose 22% to $163.5 million, while GAAP gross margin improved to negative 13%, up from negative 55% a year earlier. The adjusted loss narrowed to 8 cents per share. However, cash outflows climbed during the period, with operating cash usage increasing to $150 million from $105.6 million. Unrestricted cash dropped 27% from the end of March to $162 million as of June 30.
Chief Executive Jose Luis Crespo emphasized that maintaining effective liquidity management remains a critical focus. The company continues to target positive EBITDAS in the fourth quarter, a metric that excludes interest, taxes, depreciation, amortization, and share-based costs.
The sector divide was highlighted by Bloom Energy Corp. (NYSE:BE), which reported a 166% surge in second-quarter revenue to $1.07 billion, with a GAAP gross margin of 33.4% and operating cash flow of $226.4 million. Bloom's operating cash inflow for the quarter surpassed Plug's total preliminary cash holdings, and its revenue was 6.5 times greater than Plug's most recent quarterly revenue. The gross margin difference was approximately 46 percentage points. Bloom CEO KR Sridhar noted that all major US hyperscalers had approved its power solutions, sending Bloom shares up over 10% in after-hours trading.
Despite the contrasting performance, the read-across remains limited due to different business models. Bloom provides solid-oxide power systems deployed on customer sites, while Plug focuses on hydrogen production, electrolyzers, fuel cell technology, and material handling equipment. However, the valuation gap suggests investors are prioritizing growth supported by cash generation over mere sector exposure.
The immediate challenge for Plug comes at Friday's close. The Texas earnout has the potential to reach $26.5 million, and an additional $14 million in collateral could be freed once related obligations are assumed. However, risks remain significant. The Texas deal is subject to conditions, and the earnout requires verified grid capacity. The $142 million agreement in New York includes a March 31, 2027, outside date and is subject to regulatory approval. If high cash usage continues, additional funding may result in shareholder dilution.
The market is sending a clear signal: for Plug, converting assets into cash outweighs orders and margin improvements. Securing a straightforward Friday close would be positive, but the key test will be how cash is managed in the second quarter, which will determine if the relief continues.
