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There are five reasons why I think Raser (RZ) is a buy right now.

  1. A 2 million-share "spot secondary" was placed on Friday at $8.95 - a healthy discount to the prior day's closing price of $10.  The market did not like this one bit, but it's got the stock down to a very attractive level again and, if an investor really examines what happened, this stock sale exhausts RZ's recent shelf filing.  Translation: there should be no more "overhang" of the company selling stock in the immediate-term.  Plus, the company just put roughly $18 million into its pocket which helps with its continued drilling programs.
  2. It recently announced that it has drilled into one of the most important geological finds of the last 25 years in North America.  At the time the resource was certified, it had a "p90" of delivering over 130 megawatts and had a high likelihood of delivering over 230 megawatts.  Since then, the resource has continued to heat up - this is a very very hot property and the land value alone is likely worth more than Raser's current market capitalization as another geothermal developer could make a very comfortable living exploiting this property.
  3. The financing commitment from Merrill Lynch is likely to close within the next two weeks, which will silence many skeptics who have wondered aloud if Merrill would ever fork over the money.  This will knock out yet another leg of the short stool and bring Raser one step closer to delivering on its promises to build a plant by October.
  4. That plant is nearly constructed - the foundations and cooling towers are nearly ready, several units have been delivered and installed. Pictures are available on the company website.
  5. The math, to those willing to do it, is very compelling.  In a nutshell, Raser spends $5 million to drill holes on its property, and then receives $25 million in net present value dollars (it receives much more in actual dollars, but it's spread out over 10-20 years).  This is for a 10 megawatt resource - if it only delivers on HALF of what it has promised investors (100mhw per year for the first 3 and then 150mhw per year thereafter), the stock is worth 50% more than it is today.

This brief article is likely to attract the spiteful comments by shorts that other bullish Raser articles have attracted in the past.  I welcome them - I will respond to them with factual statements about geophysics, the company and the business model.  However, I will only respond to intelligent and well thought-out comments/questions. Prior authors on Raser have been lampooned with unreasonable and incorrect arguments.  In my opinion, that only shows desparation.  I will not respond to those as they are a waste of all readers' and my time.

The bottom line is this: the short case is not only tired, but incorrect. Although this story has taken some time to unfold and the company has encountered drilling, construction and funding delays, it is delivering a story with a business model which is unmatched in the alternative energy industry.

Although the recent convert deal will skew the numbers somewhat, the 8 million shares sold short may soon need to cover as additional legs of their stools are swept out from beneath them.  Plus, what if my hunch that Google (NASDAQ:GOOG) will soon become a power-purchasing and/or financing partner is correct?  Would ANYONE want to be short this stock if that happened? Heaven help you...

Disclosure: Long RZ.