Capstone Turbine Corp (CPTC) shares closed the day with a loss of 11.38%. The company said it may end its OEM partnership agreement for its microturbine products with UTC Power LLC (United Technologies UTX.) From MarketWatch:
Capstone cited certain breaches, including UTC’s failure to meet its sales targets for the year, as reason for the potential termination of their OEM deal. Capstone said it has notified UTC that it has 90 calendar days to cure the breaches. [ more ]
The first question that you may ask is, why would this affect Capstone? The first way to answer this is that Capstone is in the business of developing and manufacturing their microturbine technology. They realized that their core competency was in creating the products, they were not in the business of marketing and commercializing it. This is why they partnered with United in the first place. If they cancel the partnership with UTX, where are they going to sell their products and who is going to be selling it? They could have the most wonderful and most valued products in the world, but if they can’t sell them then the current valuations on this stock are too high. Hence the large decline today. An even simpler explanation is that, this stock has been a huge mover over the last couple of months. It could be as simple as taking profits on your 500% gain from this month? I still believe in this company and it has been on my short list for purchase. I was just looking for a good entry point. I’m not sure this is it, since it could go much lower. I would love to hear from them about a potential replacement to UTX if it comes down to it. Right now the notice has been sent and they have 3 months to fix any problems so this could all be just posturing. I will be closely looking at the trading of this stock on Monday after this news and any additional news is digested over the weekend. We shall see.