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September 25, 2024

Danbury-based FuelCell Energy faces investor backlash over proposed reverse stock split

Contributed Danbury-based FuelCell Energy's new 14-megawatt fuel cell park in Derby.

An investor has launched an effort to derail Danbury-based FuelCell Energy Inc.’s plan to perform a reverse stock split, aimed at boosting its share price above $1 to comply with Nasdaq listing rules.

A fintech entrepreneur and FuelCell stockholder, Steve Roach, submitted an open letter Wednesday morning urging fellow stockholders to vote against the proposed reverse stock split, scheduled for Oct. 31.

In the letter, Roach, co-founder and board chairman of Atlanta-based Skyscend Inc., accuses FuelCell’s board of a “complete disregard for stockholders and stockholder value.”

FuelCell’s shares were trading at 40 cents Wednesday morning.

“I believe that the current price per share of common stock is the direct result of the board’s decision to abandon any plan to ever achieve profitability in favor of subjecting existing stockholders to a death by a thousand cuts through repeated dilutive equity raises,” Roach said. 

FuelCell said in a proxy statement that the reverse stock split ratio, which will be determined by its board, will range from one-for-10 shares and one-for-30 shares.

Reverse stock splits are done to increase stock price by consolidating the number of existing shares into fewer, higher-priced shares.

In a one-for-10 reverse stock split, stockholders would receive one share for every 10 they own, but the total value of their holdings would remain unchanged.

FuelCell has said the maneuver will allow it to regain compliance with a Nasdaq listing rule that requires a minimum bid price of $1 per share for continued listing on the Nasdaq Global Market. FuelCell has until the end of November to meet the requirement.

Also, FuelCell says the move will make its stock more attractive to a broader range of investors.

“Left unsaid, however, is the fact that the board has committed the company to a business plan that has resulted in massive stockholder dilution and ever-increasing losses,” Roach said.

FuelCell reported a $35.1 million loss during its third-quarter conference call in September, an increase from its $23.6 million loss in the third quarter of 2023.

In the 2023 fiscal year, FuelCell suffered a net loss of $108 million.

FuelCell declined to comment on Roach’s filing, citing rules governing the proxy process.

However, FuelCell has previously said that it is taking “proactive steps” to keep its finances strong while also focusing on its efforts to capitalize on the “energy transition and the growing distributed power generation opportunity.”

FuelCell has been closely watched in Connecticut, especially after the state Department of Economic and Community Development (DECD) in 2014 announced a major incentive package for the company, making it eligible for up to $20 million in low-interest (2%), partially forgivable loans, and $10 million in Urban and Industrial Sites Reinvestment Tax Credits.

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