Florida energy company MagneGas Corporation (NASDAQ:MNGA) popped up on market open on Monday, as the company announced pre market that it would be holding a virtual investor conference on July 14. CFO Luisa Ingargiola is set to host the conference and – post a presentation from Ingargiola – investors will get a chance to throw questions at management in real time. The company has had a rough twelve months, currently down more than 76% on its 52 week high, and the conference call will be a chance for investors to get some answers as to what’s behind the decline.
The big question, no doubt, will be why hasn’t MangeGas’ technology lived up to its potential yet?
The company has what many are hailing as a game changing piece of technology in the clean and renewable energy space. The company has developed and patented what it calls MagneGas, which is being touted as an alternative to to propane and acetylene in the metal cutting process and, even more dramatically, a replacement for natural gas. Essentially, it converts various waste products in to a hydrogen based fuel using its combustion technology, and this new fuel can integrate pretty seamlessly with current natural gas and propane consuming machinery/tech.
The problem is, what supposed revolution in energy hasn’t taken off. As a result, investors are getting restless. The alternative energy market has never been hotter, yet MagneGas’ revenues seem to have stagnated. The company pulled in $624,000 during third quarter 2015, $677,000 during final quarter 2015 and $666,000 during the first quarter of this year. Not particularly impressive for a company that holds the rights to such a disruptive technology.
A recent financing, combined with the opening of a fresh Florida location, suggests MagneGas is finally looking to get things moving, but investors will be looking for far higher scale rollout and delivery than is currently on the company’s books. If MagneGas can convince investors on the upcoming call that it has a solid rollout strategy, then there’s no reason this company can’t quickly recover the last twelve months’ losses. That it won’t be able too, however, is a very real risk.
Despite a just announced financing (which in itself warrants some serious consideration – it’s a $10.6 million pre funded warrant and senior convertible issue that raises some questions as to the future value of an investment at this stage) MagneGas has a very weak balance sheet, and could struggle to expand in line with investor expectations any time soon. Cash on hand at March 31, 2016, came in at $2.2 million – enough to maintain a decent local market, but nowhere near the level the company will need if it is to disrupt the energy sector with its technology.
Therein lies the primary risk. Yes, its MagneGas 2 technology has some serious potential, and if institutional capital starts to take notice there’s every chance the stock could take off. Without this attention, however, and the capital it would afford the company, MagneGas’ ability to make the waves investors are hoping for seems limited.
CEO Ermanno Santilli believes the latest location opening underpins the company’s growth strategy:
In the previous two years, we have been actively growing our customer base in Central Florida. We are now in a position to provide product to Central Florida and also the eastern part of the state, which are locations previously without local service. This is another step in our strategy to continue to expand our recurring revenue base.
The bottom line?
All eyes on the virtual conference to see if management can instill some confidence into its current (and potential new) shareholders. If it can, MagneGas stock is only limited by the amount of capital the company can raise to fund its product push. We will be updating Insider Financial as soon as we know more. For continuing coverage on MNGA, sign up for our free newsletter today and get a free ebook as an added bonus!
Disclosure: We have no position in MNGA and have not been compensated for this article.