October 2014 – J.R. Jay Investments

During Plug Power’s annual shareholder meeting in July, Andy Marsh hinted that execution was one of the few unknowns standing between six Walmart distribution centers and sixty. Plug’s goal is to deploy their fuel cell solution at every Walmart distribution center, but Plug needs to prove they can handle the increased demand first. And for good reason. Up until last year, Plug’s manufacturing floor was relatively idle, and nobody knew exactly how much they could handle.

Not long after the introduction of GenKey earlier this year, Walmart signed the first multi-site GenKey deal. The initial contract started off with just five distribution centers. Plug demonstrated that they could deliver though, so Walmart added another distribution center to the deal (Sterling, IL). And it appears that Plug has exceeded expectations once again. They’ve been able to deploy entirely new sites in about thirty days, and Andy Marsh has increased his plant-capacity estimate to above 10,000 units per year.

Now how does the Ballard deal relate to any of this? It’s obvious that Walmart doesn’t like unknowns. Every move they make is calculated and yearns for certainty. So there’s no doubt they noticed that the Plug-Ballard contract was expiring this year, leaving Plug without a long-term stack supply. Yes, Plug has ReliOn. . . but ReliOn’s integration into the forklift arena is unproven. Customers like Walmart want proven technology. With the Ballard contact, Plug has now set-up five years of crucial stability and reliability within their supply chain.

Plug has proven that their balance sheet is solid. Plug has proven that they can quickly and reliably deploy their GenKey solution. Plug has proven the value proposition behind a GenKey infrastructure. Plug has proven that a transition to their hydrogen and fuel-cell systems is seamless and turnkey. And now Plug has proven that they have a reliable supply chain that can keep-up with demand. There’s little left for them to prove. Time and product-awareness are quickly becoming the only things standing in the way of more orders.

As I stated in my last post, I sold my entire stake in RadioShack a couple weeks back. But that doesn’t mean I’m ignoring the company. The recent deal with Standard General and Litespeed Management has me pretty intrigued.

I know that RadioShack has inked refinancing deals before, but this one is a bit different. If certain contingencies are met, this deal will give Standard General and Litespeed Management a majority stake in the company, allowing them the revamp the entire board of directors. Hopefully with a new board comes new ideas, new directions, and new life. As always, only time will tell, though. RadioShack still needs to make it through the holiday season with over $100 million in liquidity (along with a renegotiated supplier contract and a viable year-long business plan) before any of this can come to fruition.

Additionally, the deal requires RadioShack to issue 300,000,000 shares to the public with a $0.40 price tag. I’m hoping to see RadioShack reach a new group of investors with this offering. Because in order to attract a new crop of investors, RadioShack will need an absolutely rock-solid plan for the future. If Standard General ends-up buying all of these public shares, it will signify (to me) that RadioShack’s plan just isn’t good enough.

With so many new common shares potentially hitting the market, RadioShack is virtually starting an entirely new company (from a public-equity perspective). If Joe Magnacca’s turnaround plan slows their cash-burn enough for a revamped board of directors to come aboard, the company’s potential is enormous. It could really be day one for RadioShack. With new people and new ideas, a new RadioShack has the potential to innovate on a grand scale. How often is a ‘new’ company able to reach over 3,000 retail locations worldwide on their first day?

I’m eager to see how these next few months play out. In the mean time, I imagine this stock will become a nice toy for day and swing traders.

Month: October 2014

Understanding Plug Power’s Contract with Ballard

RadioShack’s Last Day Could Be Its First