Raser Technologies: Financing, Dilution Continue to Be an Issue for Now

| About: Raser Technologies, (RZTIQ)

An email from David regarding Raser Technologies (RZ):

..I wonder if you can find the time to respond to my request for your take on a stock which may be out of your area of expertise - Raser Technologies. Obviously the bulk of your research goes into biotechs, but I'm wondering if this one passes your "smell test," and what you think about the sector as well. It fits well into the green-tech, Obama trend but since the stock has trended down for some time, I'm wondering if to forget about it or see its current price as a buying opportunity? And in general what do you think about the sector - including stocks such as US Geothermal (NYSEMKT:HTM) and Nevada Geothermal?..

VFC's Take: Regarding Raser Technologies, it passes my 'smell test' as a long term speculative buy, however - mainly because of financing - the company has a long way to go before I'd be ready to call it a solid investment.

The alternative/green energy sector is a great one to be in right now, in my opinion, but there are quite a few companies out there that are all developing the same technology; meaning that the hard part will be finding the ones that have the best potential to succeed and then being invested in them before/if they start to make it to the big time.

Raser certainly does have a lot of potential technology wrapped up in the company, but like all other companies looking to get ahead in this sector, they don't have the financing to go-it-alone. If a big player doesn't come on board in a big way, then Raser - like others in the sector - is going to have to continue to depend on government grants to survive, or even take advantage of some of the 'stimulus' money that was to be destined to support 'green energy' initiatives.

I do like the potential of this company; if Raser can find a way to bring its technology and ideas to market on a large scale, then investors will be very satisfied over the long term, in my opinion; however, for the time being I think that financing and dilution are going to continue to be an issue.

However, it is possible that Raser can make a splash this year if its first geothermal plant (Thermo No. 1) is deemed a success. The plant, according to recent public releases, should be running at full capacity by the end of fiscal year 2009. The company has stated that revenue from electricity sold to Anaheim, California has been already coming in since the Spring, but I still think the plant - let alone the company - is a long way off from profitability, so any spike in price would be met with dilution.

As always, do your Due Diligence on this one. I think that the risk/reward profile is decent enough if you have a long term outlook. Government money is going to be pouring into this sector for years to come, so any one of these developmental energy companies that looks to have an edge could be the ones to benefit most.

Also, a buyout or licensing agreement by/with a larger power/energy supplier is also a possibility.

Disclosure: No position.