Bloom Energy has provided incorrect financial results since IPO, stock sinks more than 20%February 13, 2020
Bloom Energy Corp. announced Wednesday afternoon that all financial results the company has provided during and since its initial public offering will have to be restated due to an accounting error, sending its stock on a downward spiral.
Bloom BE, +3.67% shares had bounced back with a gain of more than 88% in the past three months through Wednesday’s close, as the S&P 500 index SPX, +0.65% increased 8.6% over that time. The stock had plummeted from a $15 IPO price to less than $3 a share last fall amid a short-seller’s report that called the company’s accounting into doubt and new clean-energy standards that shut the company out. After closing at $10.46 Wednesday, shares declined more than 20% in after-hours trading.
Bloom immediately recognized all the revenue from a certain kind of sale of its stationary power-generation servers and fuel cells instead of spreading the revenue over the life of what it calls a managed-services agreement, according to a news release and Securities and Exchange Commission filing released Wednesday afternoon. While Bloom’s auditor PricewaterhouseCoopers originally supported that decision, it changed course after reviewing a contract in December and “determined that the previous accounting for the impacted [managed-services agreements] was in error,” according to the SEC filing.
The result: Bloom will subtract $165 million to $180 million from its revenue totals dating back to the second quarter of 2018, and spread that revenue over the life of those contracts. Bloom has reported $1.24 billion in revenue during that period, so the change will take away about 15% of sales that were reported in that time before the deferred portions are added back.
Bloom also said that the change would increase operating losses in the past five reported quarters by $20 million to $35 million, and net losses by $55 million to $75 million. Bloom has not reported GAAP operating nor net profits as a public company, and reported an adjusted net profit in the third quarter of 2019 for the first time of $800,000, which now could change; Bloom said Wednesday it could not confirm if that was the case.
Bloom will also restate financial information dating back to 2016, though the company said in its announcement that changes to results before the second quarter of 2018 would not be material. Bloom went public in the third quarter of 2018.
For more: Five things to know about the Bloom Energy IPO
The day of Bloom’s debut on Wall Street, Chief Executive KR Sridhar told MarketWatch that Bloom would be profitable by GAAP standards in 2018 and sustainably onward. A spokesman clarified later that day that Bloom expected to be GAAP-profitable at the operating level, not in net income, but Bloom disclaimed all of those comments and forecasts in an SEC filing the next day.
Bloom reported a GAAP operating deficit of $154 million in 2018 and accumulated a GAAP operating loss of $147.5 million through the first three quarters of 2019, and both of those losses should grow once those periods are restated. It was expected to report operating profit on an adjusted basis for the full year before Wednesday’s announcement.
A Bloom spokeswoman declined comment Wednesday afternoon, pointing to the news release and SEC filing. In the release, Sridhar only commented on limited fourth-quarter information that Bloom provided, leaving a statement regarding the accounting error to the lead independent director of the company’s board.
“Bloom Energy has a long track record of groundbreaking innovation that is overseen by a highly engaged board and experienced management team,” billionaire venture capital executive John Doerr said in the announcement. “We are committed to upholding the highest standards of oversight and compliance and remain focused on executing our long-term strategy and creating value for all stakeholders.”
See also: Why a former Wall Street bear just lifted his S&P 500 target to 3,450
Short-seller Hindenburg Research’s report that wreaked havoc on Bloom’s stock last fall focused on Bloom’s lack of accounting liabilities related to the same managed-services agreements, which have to be renewed every year but guarantee energy rates that would make cancelation unlikely. Bloom attempted to separate Wednesday’s announcements from Hindenberg’s accusations in Wednesday’s release, stating that “these adjustments are unrelated to the service business, life of the servers or service contracts.”
“These restatements clearly vindicate the findings of our report,” Hindenberg Research founder Nate Anderson in an email Wednesday afternoon. “We remain short and believe Bloom’s equity will ultimately be rendered worthless.”
Hindenburg also pointed out large debt maturities scheduled for 2020 and 2021 in its report. Bloom said in Wednesday’s news release that it expects to refinance the debt due in December 2020 in the first half of the year.
Bloom said it expects to report fourth-quarter earnings on or before March 16 and file its annual report before the end of the quarter.
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