Plug Power Inc (NASDAQ:PLUG) has been a favorite of short sellers, who quickly point out that the stock is highly overvalued. Company shares fell heavily on Wednesday when a Seeking Alpha post by Kerrisdale Capital gave a bearish view, arguing that Plug Power is highly overvalued at a more than $1 billion market value. Kerrisdale Capital is shorting the stock, and has a price target of just $2-$2.50.

Plug Power

Plug Power raises the stake for short sellers

Plug Power Inc (NASDAQ:PLUG) management, however, is not standing still. The stock price jumped Thursday when the company announced the acquisition of ReliOn for $4 million in an all-stock deal. Washington-based ReliOn makes hydrogen fuel cell stacks. The acquisition will boost the Latham, New York-based company’s in-house technology. Short sellers have frequently highlighted the company’s weak technology development. Currently, Ballard Power Systems Inc. (NASDAQ:BLDP) (TSE:BLD) is the sole supplier of fuel cell stacks to Plug Power. ReliOn will help it diversify its supplier base. Moreover, Plug Power will also get its hands on the 34 patents owned by ReliOn.

In its income statement, Plug Power Inc (NASDAQ:PLUG) estimates $1 million in expenses this year. The company forecasts it will become profitable by the fourth quarter of 2014. Furthermore, ReliOn should be accretive to its earnings by 2015. However, short sellers have pointed out that Plug Power’s past predictions have mostly fallen short. According to Zacks Investment Research, about 20.7% of the float is sold short, indicating a very high level of bearishness regarding the company.

Plug Power soared 3931% over the past 12 months

Fundamental arguments notwithstanding, the recent rally in Plug Power Inc (NASDAQ:PLUG) shares is definitely taking a toll on obsessed short sellers. The stock stood at just $0.177 on April 4, 2013. After one year, it’s trading at around $7.13, a gain of 3931%. Zacks Investment Research rates Plug Power a Buy. However, despite unimaginable rally and outsized expectations, the stock remains well below its March 2000 peak of $1514.

Plug Power

Plug Power Inc (NASDAQ:PLUG) shares have dropped 6.55% to $7.13 as of 12:59 PM EDT today.