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No doubt, those C & D PS deals were a financing horror show for the CS hldrs. I also just realized I left out the 12.5% discount applicable to the "lower of $.371/sh, 10 day VWAP or prior day EOD pps in determining conversion.
Please note that as you stated outstanding on series C ~$7.5M + outstanding on series D ~$25M for a total of $32.5M.
If you use the $.371/sh as the "lower of" figure multiply it by the 89,483,453 shares to be held in reserve you get $33,198,361 which covers the $32.5M.
Post RS I would expect (as I stated earlier) that the number of shares held in reserve will be increased from 9M to ~14 or 15M (post 10:1 RS)
I disagree with you krays, it's not a serious misread on my part. In fact the future conversion rate is even worse than you describe See (ii). on pg 4 of the following link
https://www.sec.gov/Archives/edgar/data/886128/000114420419009210/tv514228_ex10-1.htm
The "subsequent conversion rate" I refer you to above provides PS holders
with what amounts to an additional 25% / 87.5% in total number of shares at the lower of .37/sh , prior 10 day avg VWAP or prior day closing pps. It precludes any demand for cash payment vs. CS and replaces the Bi-Monthly payments. It also allows deferment of payment until maturity date which I think is Mar. 2020.
I apologize if I sound arrogant, not my nature nor intent. I'm a bit buzzed, sad and perhaps just full of shit but it's my read. Sorry
yw Max, yeah that's for sure about getting more info here than what Co. provides. Only thing is it takes a little extra time to figure out who is just blowing smoke vs who actually does DD and provides good info.
Here's something I can't for the life of me figure out. Why did FCEL give 6M shrs of CS to series A Warrant holders? I think their exercise price on warrants was in excess of $5.00/sh so at the time they were worthless and would have soon expired. Even if FCEL's pps was over $6.00/sh and the warrants were in the money, had they converted them FCEL would've received the proceeds of the conversion price. Yet in this case they gave them 6M shrs and got nothing in return. I've looked and fail to find anything about the warrants being prepaid. So I just don't get that deal.
No or at least not IMO, on the next ER the only PS hldrs remaining will be series B hldrs. I think it worth noting to look at most recent 10Q (link below). On pg 4 look down left hand column for NET LOSS. You'll see Series B, Series C & Series D each listed individually with the losses listed respectfully. (very substantial and with direct impact on EPS)
The losses associated to the C & D PS will no longer be incurred as of 2/21/2019. In addition 5K of the 30K series D were converted prior to 1/31/2019.
https://www.sec.gov/Archives/edgar/data/886128/000156459019006637/fcel-10q_20190131.htm
Max, as to the failure to pass the increase in AS from 225M to 325M a). No I do not know what the threshold of votes required to pass was/is. b). I think it is a mute point because:
Example:
225M AS
130M OS
And lets say pps is .25/sh
If a 10:1 RS (I'm using 10:1 only because it makes it the math easier, I think they will likely do 12:1) is implemented then:
OS drops to 13M
AS stays at 225M
pps increases to 2.50/sh
The ~90M shr reserve requirement is now decreased to ~9M (But highly likely will be increased to somewhere around 14-15M shrs)
This still leaves FCEL with ~190M shr shelf with a 2.50/sh pps.
Addressing issues one at a time
Nasdaq delisting notice is for violating listing rule 5450(a)(1) which falls under "Nasdaq Global Select Market and Nasdaq Global Market Companies"
so min mkt value of securities is $50M & min pps is $1.00.
It is different for "Nasdaq Capital Market Companies" Min mkt val is $35M
https://listingcenter.nasdaq.com/assets/continuedguide.pdf
I still find it puzzling that the delisting notification letter failed to mention anything about mkt cap deficiency.
Max, I think those requirements are for initial acceptance/approval to obtain listing, I think the requirements to maintain listing are different. Sorry guys' I'm really not trying to be a "Stick in the Mud" (and no that is not mean't to be a homophobic slur .... lol)
Max, I'm fairly confident I'm right (but jury is still out). I also think that by virtue of additional clauses included in the "Waiver Agreement", "Exchange Agreement" & "Form of Consent and Waiver" each dated 2/21/2019, the PS hldrs relinquished their PS status to that of CS status. Which in effect means a BK filing would screw them too.
Waiver Agreement
https://www.sec.gov/Archives/edgar/data/886128/000114420419009210/tv514228_ex10-1.htm
Exchange Agreement
https://www.sec.gov/Archives/edgar/data/886128/000114420419009210/tv514228_ex10-2.htm
Form of Consent and Waiver
https://www.sec.gov/Archives/edgar/data/886128/000114420419009210/tv514228_ex10-3.htm
lightrock, I only find the one de-listing notice which "On November 28, 2018, FuelCell Energy, Inc. (the “Company”) received a letter from The Nasdaq Stock Market (“Nasdaq”) stating that the Company is not in compliance with Nasdaq Listing Rule 5450(a)(1) because the closing bid price of the Company’s common stock was below the required minimum of $1.00 per share for the previous 30 consecutive business days." it further states "The Company has notified Nasdaq of its intention to regain compliance with the Nasdaq minimum bid price requirement. The Company is currently in compliance with all other Nasdaq quantitative continued listing standards."
I thought the minimum mkt cap was $30M (I'm prolly wrong) but mkt cap wasn't mention in deficiency notification. I've seen other cases in which separate notifications were issued (1 for under $1.00/sh price & 1 for mkt cap)
https://www.sec.gov/Archives/edgar/data/886128/000114420418063138/tv508375_8k.htm
NYSE Min Cap reqmnt is $50M I think NASDAQ is $30M
Thx Hoghead & Krays,
An additional noteworthy point about that waiver agreement is that PS hldrs agreed to deferred installment payments. https://www.sec.gov/Archives/edgar/data/886128/000114420419009210/tv514228_ex10-1.htm
Here's something I'm unsure about, the 90M CS shrs held in reserve for C & D PS hldrs.: I'm guessing that when (not if) FCEL effects a (likely 12:1) RS these shares will not be affected by said split as they are un-issued. Thereby leaving FCEL with some shelf stock post split. Yes?
Thanks again guys
OMG, my mistake very sorry I misread,, It's no excuse but in my defense I had just been informed of my Fathers passing (he was 87). I was (& am) just trying to keep my mind off it. Sorry for my error.
One additional note though, doesn't the recent waiver agreement of ~90M shrs being held in reserve signed off on by the C & D PS hldrs cover FCEL's obligation to them?
see Item 1.01
https://www.sec.gov/Archives/edgar/data/886128/000114420419009210/tv514228_8k.htm
Six of the seven proposals submitted for vote were approved (including i. AS increase from 225M to 325M and ii. RS authorization, -with limitations-) The only one shot down was the "Executive Compensation" plan. https://www.sec.gov/Archives/edgar/data/886128/000156459019011016/fcel-8k_20190404.htm
Why did FCEL give 6M shares of CS in exchange for the 7.68M Series A Warrants? The warrants had a exercise price of $5.83/sh Which (unless I'm mistaken) FCEL would have received. I fail to understand why FCEL would give them 6M shares at no charge?
Ref.
The 8K from July 12, 2016 (Date Series A Warrants were issued)
https://www.sec.gov/Archives/edgar/data/886128/000119312516646413/d215089d8k.htm
The 8K for the "Exchange Agreement"
https://www.sec.gov/Archives/edgar/data/886128/000114420419009210/tv514228_8k.htm
Something that stood out to me in the 10Q was a zero in product sales (I could perhaps justify this internally to "sandbagging" but then to see product backlog of $1K (10Q Bottom pg 36) ... ??
At this point I feel that the only detriment to a potential RS is the negative connotation connected to it. Other than that (in this particular case) it's like converting five $1.00 bills into one $5.00 bill. The recent financing agreement documentation disclosures lends support. Everyone here has to agree that lenders do 10X more thorough DD than all of us combined. At this point a RS (if necessary) is just to meet NASDAQ reqmnts. IDK but if you think for 1 second that 5th 3rd bank didn't know everything there is to know about FCEL (seen them in their underwear so to speak) prior to making a $23M loan at LIBOR +2.25% then God speed to ya gettin out.
Thanks Max! This is looking pretty good ... some details on loan from 5th 3rd bank available in 8K filed 2day. https://www.sec.gov/Archives/edgar/data/886128/000114420419012264/tv515402_8k.htm
Almost forgot to to mention that my insights are based not only on my Vast trading knowledge but also on my Half Vast trading knowledge (probably more the latter)
If you wonder where I got the "original" $1.38/sh conversion price tho
https://globenewswire.com/news-release/2018/08/27/1556963/0/en/FuelCell-Energy-Announces-Pricing-of-30-7-Million-Convertible-Preferred-Stock-Transaction.html
I think you're absolutely correct that they will get both the AS increase and the RS authorization approvals. The 6M shr issuance for the series C PS's and the series A warrants was IMO a bargain. Ref https://www.sec.gov/Archives/edgar/data/886128/000114420419009210/tv514228_ex10-2.htm
This portion (bottom of 1st paragraph of pg 2 from link below) concerns me - series D PS originally convertable at $1.38/CS now it's worded such that it seems open ended
(II) the Company shall be deemed to have reduced the Conversion Price of any Preferred Shares converted by the Holder from and after the Waiver Effective Time and prior to the date hereof, as necessary, to cause the aggregate number of shares of Common Stock delivered with respect thereto to equal to the aggregate number of shares of Common Stock issuable upon conversion of such Preferred Shares at each such time, as applicable.
https://www.sec.gov/Archives/edgar/data/886128/000114420419009210/tv514228_ex10-1.htm
I doubt I'm adding much but re: item 4 from your list (this also relates to 2 & 3). It appears to me the RS ratio will be determined by whether or not the AS increase is approved. Thus the need to include the "will become effective after the effectiveness of the Increase in Authorized Shares Proposal" As I said prolly not adding much but your line of questions was in a reverse order (like the RS ratio would impact the AS increase)
What I wonder is does the 31M & 34M shrs "reserved" for the series D holders represent 150% as per the consent and waiver agreement
IDK FCE2020, to vote no is IMO cutting off your nose to spite your face (so to speak) I think the hurt to pps (based on approval of increase in AS and the authorization for RS) has been realized. I'm sure there will be a knee jerk reaction drop in pps at announcement of said RS but all in all I think it's a big step in the right direction towards addressing the horrific finance deals which sh holdrs have paid for. If they can't make ends meet and show profit without a share holder financed ponzi scheme then fck it. I'm sure I'll get blocked, chastised or totally ignored but I spoke my piece.
"Romance and alcohol have had a long traditional symbiosis" Not in my world they don't !!! Yikes !....lol
IDK Max, the amendment cut both the 1) draw availability period, from June 2019 to 12/31/2018 and 2) Maturity date(s) on cash draw notes from what was 5 years to what amounts to ~ 3 Mo's (Mar 2019). My (not entirely up to speed) guess would be that FCEL feels confident that they will be able to meet this due to the Series C PS payment requirements ending in Mar 2019.
IDK but I'm guessing the they're related somehow.
My biggest concern is that (if I understand it correctly) beginning Dec 1, 2018 and continuing through Mar 1, 2019 FCEL will be required to make Bi-Monthly installment pmnts to Series C & D PS shareholders totaling $1,989,687. These payments can be made via cash and or equity (CS shares at a 12.5% discounted price). And lets face it you we all know pmnts will be via equity. The series C PS payments will be complete as of Mar 1, 2019 at which time the Bi-Monthly amount will decrease to $989,687 (pmnt amount for the series D PS only) Thats a chit pot full of shrs there. Any thoughts/comments? Thanks
Please do take a look at the most recent Form 4's, you will see that of the 1.2M CS shares awarded about 90% of them are not vested until 06/2019. Of the 1.5M in share options ~300K are priced at $.85 and the balance are $1.00. Vesting of the vast majority of these options is .083/Month beginning 7/31/2018. I'm sorry but I disagree with your viewpoint that this is "over compensation" Further Spana and Wills cannot cash out on their shares unless they leave.
Sorry but I can't see anything I like about this ATM. Now not only is there $1M worth of CS (at a 12.5% discounted price) being issued BI-MONTHLY. On top of that we get a $50M ATM. If you think it's anything other than that I'm sorry but you're mistaken. Upper mngmnt should be required to take a 6% hit on salaries & bonuses since that's pretty much the dilution effect on S/H's spelled out in the announcement. Which BTW I think is a low ball estimate bigly. I've, for the most part, always been a full fledged supporter of FCEL. The timing, audacity and total lack of consideration for S/H's shown by this release has changed my mind.
Not entirely clear on it myself either, But it is entered as an expense as opposed to revenue offset.
your inquiry B) regarding who surpassed purchase threshold. I don't believe either of them (Amzn, Wlmrt) did. The $1.8M reduction in rev is attributable to : see bottom of pg 5 https://www.sec.gov/Archives/edgar/data/1093691/000110465918015397/a18-7714_1ex99d1.htm#Exhibit99_1_085223
It is also included in previous 10K (see pg 4 "change in fair value of common stock warrant liability"
https://www.sec.gov/Archives/edgar/data/1093691/000155837017008557/plug-20170930x10q.htm
Ouch (you know what I'm talking about), yes cant argue with the logic (perception is reality in nearly all cases) I'm just short of words at the current time.
IMO no the OS increase in the last few months is in most part related to series C PS redemption installment payments. From Jan 11 2018 10K :
On November 1, 2017 and on the sixteenth day and first day of each calendar month thereafter until March 1, 2019, subject to extension in certain circumstances (the “Maturity Date”), inclusive, the Company will redeem the stated value of Series C Preferred Shares in thirty-three equal installments of $1.0 million (each bimonthly amount, an “Installment Amount” and the date of each such payment, an “Installment Date”). The holders will have the ability to defer Installment payments, but not beyond the Maturity Date. In addition, during each period commencing on the 11th trading day
PPS calculation methods:
Installment Amounts paid in shares will be that number of shares of Common Stock equal to (a) the applicable Installment Amount, to be paid in Common Stock divided by (b) the least of (i) the then existing Conversion Price, (ii) 87.5% of the volume weighted average price (“VWAP”) of the Common Stock on the trading day immediately prior to the applicable Installment Date, and (iii) 87.5% of the arithmetic average of the two lowest VWAPs of the Common Stock during the ten consecutive Trading Day (as such term is defined in the Certificate of Designations) period ending and including the Trading Day immediately prior to the applicable Installment Date as applicable, provided that the Company meets standard equity conditions. The Company shall make such election no later than the eleventh (11th) trading day immediately prior to the applicable Installment Date
OK, here's the really tough part to grasp re:outstanding warrants. If you want, look back at my posts from a few months ago I inquired about the series reported as having been exercised because the math didnt make sense. ie. the reported income from warrant conversion indicated 1.28 warrants converted. But the 10K or whatever stated the series that had been converted were the ones with the 1.60 conversion price. I was told it was a typo and that in reality it was indeed the 1.28's that had been converted NOT the 1.60's.
But the bottom line here is it's not warrant conversion's holding this down . It is the $1M Bi-monthly redemption installment payments on series C PS which are being made via handing over CS (at a 12.5% discount as well)
Keep in mind the OS count will be much greater too (I'm guessing ~5M / 7% added) Which in turn spreads out the losses over that many more shares = better EPS number. Opposite effect when reporting gains. I'm pretty sure I'm right about this. Please (anybody) correct me if I'm wrong Thx
You da man Max! I'm assuming the projects you refer to are PPA's in which case it would make sense FCEL would be eligible for credits. I hadn't considered that, thanks for the sanity check help.
Max, from what I understand of the ITC's, it is FCEL's customers that financially benefit. The FCEL's and other "included" equipment manufacturers only benefit from the fact that it makes them more cost competitive in the market. Am I reading this wrong?
Aww crap wait till you see what (who) is coming
What's confusing about the (substantial) increase in AR is what uksausage was pointing out. Does Amazon/Walmart achieve a $50M tranche target upon being invoiced or upon making payment. It would appear, based on the increase in AR that it is based on invoice.
Accounts receivable.
Glad to hear it was helpful. I notice AR went from $15.2M (June 2017) to $52.8M (Sep 2017) while inventory change was negligible. There is something of greater significance IMO regarding the warrant provisions. It has to do with the 5.82M wrrnts to Amazon and Walmart.
see the last paragraph of pg 15 and 1st paragraph of pg 16 That provides info on 2 of the 3 warrant "vesting" by Amazon/Walmart. https://www.sec.gov/Archives/edgar/data/1093691/000155837017008557/plug-20170930x10q.htm
I'm still working on this but comes a time when additional knowledge gained is not worth amount of time spent to acquire it. Additionally I am far far from being an expert.
I think that is incorrect Big Daddy, it is the amount they would have received upon conversion (ie. Amazon is $1.1893 Walmart is $2.1231) that is considered an expense. This is because they are considered "prepaid" warrants at the time of issuance. One thing that still eludes me is how they calculate "Change in Fair Value of Common Stock Warranty Liability"