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  • Writer's pictureRealFacts Editorial Team

Plug Power's Stock Surges Due to $1.7 Billion Loan

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Bloomberg Markets: The Close recently spotlighted Plug Power (PLUG) as the stock of the hour, with its price surging by as much as 70%. This surge followed the announcement that the federal Department of Energy had pledged $1.7 billion in loans to the hydrogen fuel cell system manufacturer. The loan guarantee is contingent upon meeting specific technical, legal, environmental, and financial requirements. As stated in a post on its website, the Department of Energy emphasized that the company must fulfill these conditions before the agreement can be finalized and funded. 

The loan provides much-needed relief to the company and will be utilized for funding six hydrogen plants, as well as bolstering a sizable facility in Texas, reportedly surpassing the scale of their current green plant in Georgia. Abigail Doolittle from Bloomberg highlighted that the stock, at one juncture, traded around $1,500 on an adjusted basis, but has since plummeted to single digits. This demonstrates the substantial fluctuations the stock has experienced over the years and the downward trajectory it has followed. Given the consistent downward trajectory, confidence in Plug's future is lacking among many investors, with Doolittle noting that "PLUG is one of the most crowded shorts." 

The rapid rise in the stock price over a short period was likely influenced by numerous investors closing out their short positions, contributing significantly to the extent of the increase. “Covering your shorts" refers to the act of closing out a short position by purchasing the same quantity of shares that were initially borrowed and sold, typically to lock in profits or limit losses if the stock price rises instead of falls as anticipated. The complete impact of the loan's positive effects remains to be seen, but it significantly enhances the likelihood of Plug breaking out of the downward slump it has been experiencing.

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