C, I like your idea on MKTY.
MKTY is a financially troubled company, who has appeared to pull off a nice job monitizing and refinancing their developement project on PEM fuel cells. I see a lot of similarities between BLDP (fuel cell guy in the auto business (got Ford and D-C putting money in them) in that Plug Power has got GE and Detroit Edison as suger daddy's.
Problem with MKTY is they running on fumes and core test and measurement business is crappy with declining revenues and loosing money.
If PLUG goes at 14/share (6mil shares), outstanding shares will be 42 mil for a market cap of 588mil.
MKTY should have 13,7mil shares (provided they come up with 21 mil to buy 2,33mil shares at 7.5 before the IPO......they will as some of their shares will be free trading after the ipo and lockup is 180days, however this could put some pressure on PLUG early on).
MKTY's shares will be worth 191mil at the offer price).
Assuming a 30% discount on MKTY's share of PLUG, PLUGs got to trade at 2.6 time the offer price (36 bucks for a market cap of 1.5 bil) to justify MKTY's close on Friday (figuring MKTY is worth 20mil and subtracting that from their market cap of 367). While PLUG will be well capitalized they aint going to be worth 1.5 bil as all they have is some govt contracts where they are obligated to loose 25-50% on the contracts and a committment from GE to take 485 power cells for a max of 8 mil in 2000/2001.....a product whose design isn't finalized. PLUG is joining the fray with 10 or so other companies trying to develope this market, although they will look a bit more attractive with their distribution deal with GE. Knowing the cost obstacles I think GE is using PLUG as a developement project (bleeding edge stage, that companies valued on earnings don't like to mess with)....if it works, fine they can buy the rest....if not, oh well its pocket change to them anyway
This Fuel cell business is very iffy, as it is estimated that costs have to drop 5-10 fold to get them competitive with alternate forms. it should be pointed out that PEM fuel cells are touted as being emmission free (partially true in the automobile arguement as its replacing deisel or gasoline)....they are only if they run on hydrogen....but that stuff comes from natural gas......which is the source of a lot of our electricity.
these PEM fuel cells will polute (co2) just as much as natural gas derived electricity.
Anyway, given PLUG is a few years behind BLDP, in a segment that is more crowded and the fact PLUG is still developing a product I don't see them trading at internet premiums. Besides they be in a capital intensive mfg business. Thus if PLUG goes for a 20-40% premium MKTY is due a 50-30% haircut from today's close.
Mad2
Any idea when they're going to blast this one off? |
