Coal Is Dead, And What Happened With Advanced Emissions Solutions Is A Dead Cat Bounce


Advanced Emissions Solutions stock price jumped over 60% in the last week as the EPA proposed a supplemental finding.

Every major developed country has committed to move away from coal, and global consumption has already peaked in 2013.

Although the company is currently hoping to get restatement by Q1 2016, its business model may become irrelevant by then.

We believe this sudden increase is more of a dead cat bounce rather than the start of a secular trend.

Some Analysts Thought the Stock Was Undervalued

A month ago, when Zacks Investment Research said Advanced Emissions Solutions Inc. (NASDAQ:ADES) was “flying under the radar,” nobody paid much attention. In fact, since Zacks insisted that the ADES stock price was undervalued, the price actually went down from around $5.70 per share to $3.75, representing a 34.21% decline in a month.

01 - Price

Advanced Emissions Solutions stock price soared 63.5% over last week

Suddenly, on November 23, the stock price jumped around 63.50%, and investors started wondering what actually happened!

The sudden change in price drew attention, but it was not a complete surprise to anyone who has been closely following Advanced Emissions Solutions.

This Exciting Time for Advanced Emissions Solutions Will Not Last

If you are still wondering what pushed the ADES stock price over 60% in a day, then you have to understand what the Environmental Protection Agency (EPA) said on November 20, 2015.

On Friday, the EPA proposed a supplemental finding that said “including a consideration of cost does not alter the EPA’s previous determination that it is appropriate to regulate air toxics, including mercury, from power plants.”

This was basically a response to the “narrow” decision taken by the United States Supreme Court back in June 2015, which said the EPA must reconsider the Mercury and Air Toxic Standards (MATS), as it did not take into account the costs of regulation.

Regardless of the Supreme Court ruling, the fact remained that until the D.C. Circuit Court came to a conclusion about the matter, the Mercury and Air Toxic Standards rules were still in effect. With the new response from the EPA, investors thought there would be a higher chance that the set limits for mercury and acid gases would likely to stay and benefit companies that provide pollution control solutions.

If you are thinking this would translate into a huge opportunity for companies like Advanced Emissions Solutions, as it would create strong market demand for their equipment in the compliance space, you are wrong!

Coal Will Not Be Relevant in a Few Years

After Obama’s Climate Action Plan, it is virtually impossible to make an investment in coal plants and make it profitable.

It is shameful for politicians in the developed world to admit that a portion of their power generation efforts still involves burning coal. The latest effort to win the “shame” contest came from the U.K., when one of their ministers said the U.K. must “move away from coal power stations.”

Yes, the developed world is moving away from coal.

If you look around the world and think that coal is still as relevant as it was in the beginning of the industrial revolution, you might be right today. However, if you closely follow the industry, you should be very worried about the long-term prospects of coal.

According to the latest report from the Institute for Energy Economics & Financial Analysis, coal production and consumption in the world have already peaked back in 2013! Furthermore, the use of coal is set to decline at a rate of 2-4% in 2015, as large coal burning countries like China are reducing their use. They seem to be paying attention to the deadly air pollution in major cities like Beijing, finally!

Besides third-world countries like Bangladesh, nobody is chopping off forests to burn coal anymore.


While some investors went overboard based on a single EPA response on November 23, Allianz SE turned its back on coal the next day. As far as the analyst ratings go, the optimistic Zacks Investment Research has already downgraded Advanced Emissions Solutions.

If you think pollution control companies like this one have any chance under the changing geopolitical circumstances, then you have not yet seen what a dead cat bounce looks like. It looks like the price chart of Advanced Emissions Solutions.

While Advanced Emissions Solutions “continues to make progress on its restatement” by Q1 2016, it will certainly have a hard time making headwinds in a declining core market.