Page 105 - Forbes - USA (March 2020)

natural gas–fired power plants, which emit 850 pounds, and for fraudulently inducing them to settle. Bloom contends
much better than coal, at more than 1,400 pounds. Yet as the suit has no merit.
the fuel cells age, the electrochemical process degrades their On July 25, 2018, the day of Bloom’s IPO, Sridhar falsely told
efficiency. Based on Forbes’ calculations, some of the oldest MarketWatch reporters that the company was profitable as
boxes in Delaware have put out 960 pounds of CO2 per mwh. of the second quarter and that it would be cash-flow-positive
In California, where local utility PG&E generates power at and GAAP-profitable that year, when in fact it was still losing
210 pounds per mwh, Bloom may be losing its appeal. money. Bloom issued a correction the next day, and assures
Then there’s the issue of hazardous waste. When Bloom Sridhar “simply made a mistake.” Other investors who scooped
applied for its operating permits in Delaware, it answered up Bloom shares have sued Sridhar and Bloom for, among
no when asked whether its systems would generate any other things, hiding what short-seller Nate Anderson of Hin- 103
hazardous waste. When in 2014 regulators started asking denburg Research estimates to be more than $2 billion in fu-
more questions, Bloom disclosed that its filtration systems ture liabilities tied to servicing and replacing old Bloom boxes. B
caught a host of nasties like arsenic, benzene, sulfur and Bloom denied the Hindenburg report; the suits are pending. As L
lead. Queried why it had been shipping this hazmat out a former Bloom executive explains, Bloom relies on proceeds O
O
of Delaware to processors and incinerators across the na- from new boxes to help offset rising service costs on old ones: M

tion, without following rules, Bloom replied that it thought “They have to keep selling more on the front end to pay for E
it was exempt, because it didn’t open the canisters. Nope, the back end.” In recent months Bloom raised more than $250 E
N
said the U.S. Environmental Protection Agency, which in million from the likes of Southern Company to swap out its old R
G
2015 reminded Delaware to enforce hazmat rules “no less boxes in Delaware. Bloom could see a wave of such replace- Y
stringent” than federal regulations, with “cradle to grave” ments before the 2023 phase-out of the lucrative federal invest-
responsibility for waste management. Bloom insists that it ment tax credit worth up to 30% of capital invested. When that
does not “produce” hazardous waste, that it began to han- credit ends, so will a reliable avenue of financing. Underscoring
dle the desulfurization units differently after the EPA issued the sense that Bloom may be living on borrowed time are the
guidance and that it is now EPA-compliant. The agency is exits of several executives and the pending retirement of its
still seeking to collect a $1 million fine from Bloom. CFO. Former U.S. Senator Kelly Ayotte also left its board and
Some investors have been misled along the way. In 2012 was replaced by former General Electric CEO Jeff Immelt.
the Securities and Exchange Commission temporarily If there is a silver lining to this story, it is that there are
barred Dwight Badger and Keith Daubenspeck, the cofound- plenty of places in the world with dirtier air than California
ers of brokerage Advanced Equities, from their jobs after where people may be interested in what Bloom is selling.
they used false information In Japan, the company has
and negligent due diligence, partnered with Softbank on
respectively, to help Bloom several installations; in South
raise $150 million. Misstate- Korea, it recently built its first
ments included that Bloom “Power Tower”—a four-story
had $3 billion in orders from structure with open sides,
the CIA and a grocery store stacked with its boxes, and it
chain, and that it was getting is now exploring, with Sam-
a loan of up to $300 million sung, how to use the boxes to
from the Department of En- power ships.
ergy. In emails written to the Sridhar insists that Bloom’s
SEC, Badger claims to possess prices will keep going down
copies of presentations made while its resiliency goes up.
Powered Up
to Bloom’s board (including He draws inspiration from
This Bloom installation at La Jolla Commons in San Diego generates
Doerr and former Secretary about 5 million kilowatt hours of electricity per year. satellite pictures of the world
of State Colin Powell) that at night, which hang on the
prove Bloom lied to investors. In 2014, the brokers settled walls of Bloom’s offices. The bright lights amid the darkness
for $16.7 million, much of it in warrants (the right to pur- represent the vast majority of the world’s population. “The
chase shares) if and when Bloom went public. After the IPO, other 2 billion are basically out of grid and out of luck,” he
Bloom’s share price never went high enough to put Badger says. “What drove me to start the company is the same” as
and Daubenspeck in the money. In 2019 they sued Sridhar what drives him now: to feel “like I have made a dent.” F

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