Plug Power (NASDAQ: PLUG) shares have been plummeting. The stock hit another three-year low today as investors sold in droves when the market opened. After sinking as much as almost 17%, Plug shares were down by 13.2% as of 10:15 a.m. ET and have lost 86% of their value in the past year.

The recent decline came as investors anticipated the news that was finally announced today. Plug Power is planning to raise $1 billion. That capital raise comes at about the worst possible time and likely strikes investors as a desperate move.

Crushing existing shareholders

The capital raise will come from offering new shares “at the market.” That means the shares won’t be sold all at once but rather when the broker working with Plug — B. Riley Securities — deems market conditions favorable.

But the move will slam current shareholders. Plug Power’s market cap is now about $1.4 billion. So, issuing another $1 billion worth of shares will grow outstanding shares by enough to meaningfully cut the ownership level of existing shareholders. The outstanding share count would rise by about 70% once the issuance is complete.

When will the market be favorable?

Issuing new stock is a common way for public companies to raise money. The problem here is that Plug Power is announcing it with the share price at its lowest level in more than three years. The concern is that it is now in a downward spiral where market interest for Plug shares won’t improve.

The business itself isn’t in a great place. In its third-quarter report, the hydrogen fuel cell company warned investors that it may be unable to continue as a “going concern” without raising fresh capital. So, this isn’t unexpected, but it comes after shares have plunged more than 60% since that notice.

That put Plug Power in a difficult position, forcing it to announce this massive capital raise. That sense of desperation is why investors continued to sink shares today and why the stock may not recover.

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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.