After Revealing Restructuring Plan, Ballard Announces Equity Deal

At least one analyst bristled when two days after announcing a five-year restructuring plan that was well received on Wall Street, Ballard Power Systems Inc. (Nasdaq: BLDP) announced a share-issuance agreement with a group of underwriters led by RBC Capital Markets and CIBC World Markets. As part of the agreement, BLDP and its underwriters will issue 7.7 million common shares at $13.02 each for total gross proceeds of approximately $100.2 million, according to a Dec. 11 announcement. Ballard says it will use the net proceeds of the offering principally for research and product development, to buy equipment and for general purposes.

"The favorable response of our investors to our five-year plan announced December 9, 2002, has given us the opportunity to complete a financing that we anticipate will improve Ballard's ability to achieve positive cash flow from operations," states chairman and CEO Firoz Rasul in the announcement. "This financing will increase our cash reserves to more than $375 million.”

The restructuring plan calls for significant reduction in cash consumption, organizational restructuring through the combining of three of its four divisions, a 400-employee staff reduction, development for its next-generation fuel cell engine, and further commitment to the company's automotive partners, according to a Dec. 9 article at Dow Jones Business News online.

At least one analyst was dismayed at the equity-financing announcement. "We are stunned by this move, which merely follows days after Ballard management led the investment community to believe that it had enough funds to sustain the company through 2007, and would not likely seek to raise additional capital before then, other than 'opportunistically,'" states Gary Holdsworth of Wedbush Morgan via a research note, as reported in a Dec. 12 article at CBSMarketWatch.com. In addition to questioning the integrity of company leaders, Holdsworth changed his BLDP rating to Sell.