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Shares of Plug Power (NASDAQ: PLUG) slumped 30% in June, according to data provided by S&P Global Market Intelligence. Investor interest in the hydrogen stock picked up in recent months after the cash-strapped company secured a large conditional loan guarantee to fund its growth plans. A development in June, however, means the funding could run into a roadblock, and that triggered panic selling in Plug Power stock.

Why Plug Power stock keeps falling

After issuing a "going concern" warning in late 2023, Plug Power said it had resolved the issue in March after signing an agreement to sell shares to investment bank B. Riley Securities and securing a term sheet with the Department of Energy (DOE) for a loan of $1.6 billion. In May, Plug Power even received a conditional commitment for a loan of up to $1.66 billion from DOE to fund the construction and development of up to six green hydrogen production plants.

In June though, U.S. Senator John Barrasso, a ranking member of the Senate Committee on Energy and Natural Resources, asked the DOE's inspector general to investigate the department's conditional commitment to Plug Power on grounds of potential conflicts of interest between the DOE's Loan Programs Office and its director, Jigar Shah. For context, Shah co-founded a company that lent money to Plug Power, which the latter repaid ahead of schedule as it started pursuing a DOE loan.

The senator also flagged other ties between Shah and Plug Power and questioned the DOE's decision to lend to Plug Power, given the company's dire financial condition.

Plug Power is, indeed, deep in losses and burning cash rapidly. Although its revenue grew 27% in 2023, it fell largely short of its revenue outlook of $1.2 billion. Worse yet, Plug Power's gross margin tumbled to -57%, and its net loss almost doubled to $1.4 billion in 2023.

In another development last month, the Tonawanda Seneca Nation, a federally recognized tribe, wrote to the DOE urging it to reject a loan to Plug Power. It alleged that Plug Power is evading environmental reviews at a hydrogen plant under construction at a site bordering the Tonawanda Seneca Nation territory.

Should you still bet on Plug Power stock?

Plug Power stock is now down nearly 42% so far this year and a staggering 75% in one year, as of this writing. Even after the company claimed to have "resolved" its going concern issue in March, I was wary about the stock, as Plug Power's losses are only widening, and its financial constraints are too big to ignore.

Plug Power could be in deep trouble if it fails to secure the DOE loan. In fact, even a delay in funding could prove costly for Plug Power. Investors should keep these risks in mind before getting enticed by the recent price drop in the hydrogen stock.

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Neha Chamaria 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.