**tl;dr: PLUG has a history of burning shareholders and customers, does not make an economical product, and the shares are worth much closer to $0 than to $30. If you’re thinking of buying shares or calls, don’t. If you hold shares or calls, sell them. If you want to make a bet, buy puts.**
It’s July 2000. You’ve made a decent amount of tendies over the past few years investing in hot tech companies. The markets are down a fair bit from their March highs, but that just means there are more buying opportunities. Maybe you can find the next Microsoft.
You find a stock that looks promising — Plug Power. It’s down 50% from its 52-week high, but you’re sure it’s gonna be huge. Green energy is the future. It’s got the largest company in the world, General Electric, as an investor. [Bob Nardelli](https://en.wikipedia.org/wiki/Robert_Nardelli), the head of GE Power Systems and a contender to succeed Jack Welch, is on the board of directors. And their joint venture with GE just announced a deal to sell 1500 fuel cells to a Saudi Arabian trading company controlled by the royal family. If even the oil kingdom is moving to the hydrogen economy, you want to be a part of it. You’re buying.
Over the next few years, you will lose more than 95% of your investment.
What happened? Well, there is public documentation on some of this: the Saudi trading company sued Plug and the GE subsidiary that co-owned the joint venture in 2008 for breach of contract and misrepresentation. You can find a summary of the complaint [here](https://casetext.com/case/soroof-trading-development-company-ltd-plaintiff-v-ge-microgen-inc-and-plug-power-inc-defendants), but I’m working from a copy of their First Amended Complaint.
The complaint alleges that GE and Plug “understood by February 1999 that [Plug’s fuel cells] would never be marketable” but formed the joint venture (GE Fuel Cell Systems, which I’ll call either GEFCS or just “the JV” for short) anyway to try and recoup costs. Soroof (the name of the Saudi trading company, but I’ll call them “the guys who financed 9/11” for long) further alleges that GEFCS was just an empty shell with “nominal assets consisting of a small amount of furniture, a telephone switch and a computer server” and an office subleased from Plug. And GEFCS duly extracted $1 million from the guys who financed 9/11 in exchange for exclusive rights to distribute the fuel cells in Saudi Arabia.
Somewhat incredibly, the complaint alleges that Plug and GE then proceeded to jerk around the guys who financed 9/11 for *five years*, telling Soroof over and over again that they were improving the product and it wasn’t quite ready yet but it would be soon. Finally, “In 2005, Soroof expressed its dissatisfaction with [GE and Plug’s] complete lack of performance to date”, which you might recognize as the same thing your wife did right before she introduced you to Chad. The JV had effectively been dead for years (or so Soroof claims), but GE and Plug knew to expect a lawsuit, and hurriedly wound up the operation, with PLUG indemnifying GE against the first $1 million in claims arising from GEFCS. Plug [filed an 8-K](https://www.sec.gov/Archives/edgar/data/0001093691/000119312506063079/d8k.htm) notifying the markets of the termination of the JV, but they didn’t tell the Saudis. And when the Saudis found out in early 2007, they completely lost their shit, and they sure did sue. (As best as I can tell the lawsuit ended up dissolving in a flurry of procedural arguments. I’m not a lawyer and I don’t care.)
So if this complaint was filed by the guys who financed 9/11, why should you believe them? Well, there are other signs that the higher-ups at GE knew pretty quickly that Plug’s fuel cells weren’t going to be commercially viable. GE had agreed to buy fuel cells from Plug in early 1999 — but they [couldn’t meet specifications](https://www.wsj.com/articles/SB957739751789506989) and cancelled the entire contract in spring 2000. Bob Nardelli was [off the board by mid-July 2000](https://eepower.com/news/john-g-rice-assumes-position-on-plug-powers-board-of-directors/), and it’s telling that neither his [LinkedIn page](https://www.linkedin.com/in/bobnardelli/) nor [his successor’s](https://www.linkedin.com/in/john-rice-30b651118/?originalSubdomain=hk) nor the [president of the JV](https://biography.omicsonline.org/france/technip/barry-glickman-36852) makes reference to their involvement with Plug or GEFCS. And this also sounds like the MO of General Electric circa 2000, which was, in hindsight, [a bag of shit trading at 50 times earnings](https://philo.substack.com/p/success-theater) propped up by expansion into questionable businesses like long-term care insurance and a whole bunch of accounting gimmicks. That stock is also down more than 80% from its October 2000 high, although at least you got paid a dividend for your trouble.
But the biggest reason GE should have known early that Plug’s fuel cells wouldn’t be marketable is basic physics. To get green hydrogen, you need to consume electricity to separate water into hydrogen and oxygen (losing some along the way). Then you need to consume more energy to compress and transport the hydrogen. Then you turn it back into water, electricity and waste heat in a fuel cell. It’s much cheaper and more efficient to transmit the energy directly over high-voltage power lines! For some applications — like the forklifts that Plug promotes today — there is a last-mile problem to solve, but as I’m sure you’ve heard, battery technology today is very good, and it’s just more economical to use battery power. (I’ll have more to say about both the physics and the forklifts in follow-on posts.)
Through the fiscal years 2001-6, Plug Power produced a cumulative loss of $16 million on $67 million of revenue *before any operating expenses*. Their net loss was much worse. By early 2007, the stock was trading at about where it is today on a split-adjusted basis, and if you bought in July 2000 you were down 95%. It got cut by another 90% before it rallied last year. And today looks a lot like July of 2000: Plug is [partnering with big oil companies](https://www.marketwatch.com/story/fossil-fuel-mainstay-baker-hughes-joins-plug-power-in-green-hydrogen-fund-11617629145) and [taking sovereign investment money](https://www.sec.gov/ix?doc=/Archives/edgar/data/0001093691/000110465921001786/tm211407d2_8k.htm). More worryingly, it’s delinquent filing its 10-K for 2020 and is [restating its accounts](https://www.marketwatch.com/story/plug-power-to-restate-financial-statements-stock-plunges-11615930211) for the last two years, and it posted a [negative gross profit in Q3 2020](https://www.sec.gov/ix?doc=/Archives/edgar/data/0001093691/000155837020013381/plug-20200930x10q.htm). Learn from the mistakes of the past. Sell the dip in PLUG.
Positions: 25p 4/30; 20p 6/18