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TheStreet Open House

Plug Power Inc (PLUG), VW Deal Rumour: Flogging A Dead Horse?

Bulls trapped in the over-hyped, overbought stock may be looking for a way out

Volkswagen AG OTCMKTS:VLKAY (VOW) has said in no uncertain terms that it is unaware of any work on fuel cells being conducted with Plug Power Inc (PLUG), and that its own fuel cell program, of which production is years away, is located in Germany.

Plug Power Corp PLUG FCEL

Plug Power Corp PLUG

Yet, hopeful bulls will have none of it and insist on spreading rumors that Plug Power is on the verge of doing a deal with the German automaker. Do the bears have them over a barrel?

Volkswagen's technology of choice

By all appearances, Volkswagen AG OTCMKTS:VLKAY (VOW) is currently pursuing lithium-air battery technology for its electric cars, a process that can triple the storage capacity from the current 24.2Kwh used in the new 2015 e-Golf to a whopping 80kWh of power, giving a vehicle a range in miles in the triple digits.

Short sellers have Plug Power bulls by the short hairs

According to this ValueWalk article, Plug Power Inc (PLUG)'s put-call ratio in the options markets has shot up from just 3:100 at the beginning of this year to 63:100 currently.

Short interest in the stock is up from 2.4% last September to 11%, according to research firm Markit.

Powerhouse stock

Over the past 12 months, Plug Power Inc (PLUG) has surged higher by over 3263%, and is one of the best performing stocks of the year.

The stock received a massive boost on news of its deal with Wal-Mart Stores, Inc. (WMT) for the supply of 1,738 hydrogen fuel systems at the retailer's North American distribution centers. The stock was also bid up because of glowing projections of turnover touching $65 million this year – a solid jump from the revenue of $26.3 million that Plug Power Inc (PLUG) reported during 2013.

Citron Research pulled the plug on Plug

Plug Power Inc (PLUG)'s moonshot was, however, rudely ended by a research report from Citron Research that said the stock was just a 'casino' stock that deserved to trade for pennies. The stock lost 42% the day of the Citron report, and is yet to recover its former glory.

Given the circumstances, investors should believe the Volkswagen story only when they actually see an announcement from the companies.

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