Case Study - PLUG Power Inc
Plug Power Inc(Plug). provides turnkey hydrogen fuel cell solutions to the electric mobility and stationary power markets in North America and Europe. It focuses on proton exchange membrane (PEM) fuel cell and fuel processing technologies, and fuel cell/battery hybrid technologies, as well as related hydrogen and green hydrogen generation, storage, and dispensing infrastructure. The company offers its products to retail-distribution and manufacturing businesses through a direct sales force, original equipment manufacturers, and dealer networks. Plug was founded in 1997 and is headquartered in Latham, New York.
This case study shows how Cmind predicted the red flags associated with Plug’s financial filings. The prediction date is Aug 6, 2020. A news article on March 16, 2021 shows that Plug has accounting issues. Our prediction is six months earlier than discovered by the market. We also show how the red flags and news impacted the Plug’s stock movements.
The following is the chronology of Cmind’s predictions and Plug’s stock price.
1. Plug Power (Ticker: PLUG), a leader in turnkey hydrogen solutions, was riding high in early 2020.
2. The Cmind platform quarterly financial risk score identifies PLUG as a medium to high risk on Aug 6, 2020. Since the market was unaware of this risk it remained bullish on Plug, based on its 10Q filings, and its stock outperformed its peers. The following chart shows that the cumulative return of investing in Plug over the 14 days following its earnings release date is much higher than its competitors over the same period.
3. On March 16, 2021, a news article reported that Plug had issues in its financial statements from 2018 to 2020 on March 16, 2021 - half a year after Cmind identifies the red flags. The issues are related to book value of the right of use assets and related financial obligations, loss accruals for certain service contracts, the impairment of certain long-lived assets, and the classification of certain costs, resulting in a decrease in research and development expense and a corresponding increase in cost of revenue.
4. Cmind’s red flags were n such areas as fixed assets, gross margin, and revenue recognition anomalies align precisely with Plug's own stated problems. Furthermore, the platform compared the linguistic patterns of Plug executives against its competitors and identified an anomaly in their linguistic patterns.
5. Since the news reporting date of March 16, 2021, Plug has underperformed its industry peers by 20% (240% annualized). The market reaction to the news drove the Plug stock decline. The following charts compare the cumulative return of investing in Plug and its peers over the 14 days following the news announcement that made the market aware of its accounting errors.
