Ballard shares jump with refinancing news

Shares of Vancouver, British Columbia's Ballard Power Systems (Nasdaq: BLDP) ended the trading day up 18 percent today at $2.77 after analysts praised a reorganization that is putting more money in the pocket of the unprofitable startup.

The fuel cell developer said it raised CAD$41 million ($34 million USD) in non-dilutive financing through a reorganization by Superior Plus Income Fund that covers Ballard's $900 million in tax losses.

The company plans to transfer its assets and liabilities to a new wholly owned subsidiary, New Ballard, which plans to trade under the same symbol and exchange shares on a one-to-one basis.

The deal is awaiting regulatory approvals and approval by shareholders, scheduled for a vote in the second half of December. It's expected to close by Dec. 31.

Ballard announced the transaction after the close of market yesterday.

BMO Capital Markets listed its target price for Ballard at $4.25 with a "hold" rating.

"This is fundamentally a sale of Ballard's tax losses of some $900 million at a rate of around 5.25 percent," BMO analyst Brian Piccioni wrote. "We believe Ballard remains some time away from being profitable, and will probably need additional cash to reach profitability; therefore, we believe this is a good transaction for Ballard shareholders."

Uncertainty about Canada's new legislation on distributions from income trust funds have hurt stock prices and the ability to raise capital, according to a report by analyst Jeff Osborne of Thomas Weisel Partners.

Osborne wrote that Ballard's management is taking the right steps to prepare the company for profitability once the fuel cell market materializes. But he said he expects the company to continue to lose money until at least 2010.

The move is "further strengthening the balance sheet at a time when capital is hard to come by," Osborne wrote, maintaining Ballard's "neutral" rating and a 12-month target price of $4.

Osborne said the best prospects for Ballard's products exist in cell towers and forklifts.

Ballard has signed deals to supply fuel cells for cell towers in India (see India telecoms to get fuel cell power and Ballard, Acme in fuel cell supply deal).

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