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FLNC shares fell more than 15% during Wednesday’s session, while it has risen around 6.5% so far on Thursday. Wednesday’s fall followed a media report that detailed a lawsuit filed against FLNC by a customer for EPC work performed on the Diablo Energy Storage project in California.
“We believe the selloff is overdone,” declared analysts at JPMorgan. “We believe the complaint is likely a one-off, and the stock reaction was significantly greater than a worst-case outcome in the lawsuit.”
“We believe the Diablo situation is a one-off and note that other FLNC projects faced COVID-related delays without payment issue,” they added. “We also note that even in a draconian scenario whereby the court rules against FLNC and the company is forced to refund the full ~$229mm, the company has ample liquidity with $453mm net cash as of September, and the refund would amount to ~$1.25 per share, below the $4.21 decline in the share price yesterday.”
JPMorgan also believes that “even in this draconian scenario,” FLNC’s strong reputation supported by ~15 years of project completions would be largely unharmed.
