Fuel-cell developer Plug Power (Nasdaq: PLUG) dropped this morning on news that its president and CEO, Greg Mittleman, has resigned, effective immediately. Executive Vice President Greg Silvestri will become Chief Operating Officer and manage the company's day-to-day operations. The press release gave no reason for the resignation.
That's a big mistake. Rule #1 for investor relations at any company ought to be, "Communicate freely and frankly with investors about signficant changes in the company's business." When the CEO (and a Level I director) resigns precipitously, I as an investor want to know why. I don't want to hear canned statements that he still believes in the business and that he has done great service for the company. I want to know what opportunity lured him away, what concern prompted the change, etc. (Of course, any reason given wouldn't prevent people from speculating on the real reason, which I'll do soon.)
This isn't the first time that Plug has been less than forthcoming about a major development. In May, the company announced together with earnings that General Electric (NYSE: GE) was no longer obliged to fulfill their take or pay agreement for 485 units this year. Further, Plug presented a shift in product focus from grid-independent applications to grid-parallel. This news took everyone by surprise and prompted downgrades from Merril Lynch, Goldman Sachs and Bear Sterns.
The latest quarter's earnings report, released earlier this month, brought more surprises.
- Instead of building 500 beta units this year, Plug will build 125.
- Large-scale production ramp-up will be pushed back a year.
- Commercial product shipments to GE will not begin until 2002.
The biggest surprise, the one that probably contributed most to the subsequent 24% drop in the stock, was that Plug's revenue for the quarter came in at $2.4 million, well below expections in the $3.9 million range. The $0.42 loss per share also exceeded estimates of $0.35.
Granted, Plug is charting new territory. It has set pretty aggressive goals for itself that require significant achievements in research and development. It's not a crime that it has run into more problems perfecting fuel processing and workable product designs than anticipated.
The trouble is that the company didn't give a more achievable plan for the future. Concerning new product development, investors have to rely on the company's estimate of a likely product schedule. If this last quarter saw significant problems, there is reason to think that future product development may be problematic as well. Plug has got to communicate its goals clearly, realistically, and often.
Since Plug has given investors no reason for Mittleman's departure, we have to guess at them. It's facile to look at the recent revenue shortfalls, product delays and contract renegotiations and conclude that Mittleman is the fall guy. Whether new management will get the company back on track is an open question.
Your Turn:
Talk about today's news on the Plug Power discussion board. You can also read and write about fuel cells generally on the Fuel Cells and the 21st Century discussion board.
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