Retail Exits, Institutions Wait: Two Catalysts Could Decide ITM Power's Next Move

ITM Power stock rallies ahead of May 26 subsidy verdict on £46.5m grant and MSCI Small Cap entry, but retail investors cash out and insider selling raises caution.

The coming fortnight presents ITM Power with a rare double trigger. On May 26, the UK subsidies authority will deliver its verdict on a £46.5m grant for the Chronos production line in Sheffield. Three days later, on May 29, the company’s shares will officially enter the MSCI United Kingdom Small Cap Index. The stock has already responded, climbing to 163.20 pence and pushing the market capitalisation back above £1.11bn.

Yet beneath the rally, investor behaviour is sharply divided. Retail holders have been among the sellers, locking in profits after a gain of roughly 160 percent since the start of the year. On AJ Bell, ITM Power was the most sold stock in a single session as the price slipped to 143.30 pence on volume of 13.2 million shares — more than double the daily average of 5.3 million. The message from the private-investor camp is that early buyers are cashing out before the next milestone.

Adding to the caution, technology chief Simon Bourne exercised old share options and sold around 873,000 shares, citing tax obligations. The company’s explanation is standard, but the timing has raised eyebrows given the stock’s trajectory.

Institutions bet on policy support

Large institutional investors are taking a different view. Several banks have raised their price targets and ratings, citing improved earnings visibility and a more supportive political backdrop for hydrogen.

• Jefferies lifted its target to 200 pence from 115 pence.
• Morgan Stanley upgraded to “Overweight” with a target of 170 pence, up from 60 pence.
• UBS remains more cautious at “Neutral” with a fair value of 60 pence.
• Berenberg maintains a “Buy” but trimmed its target to 110 pence.

Morgan Stanley sees ITM reaching EBITDA break-even in fiscal 2028, earlier than the consensus. Jefferies points to stronger policy tailwinds for hydrogen projects, which underpin its positive stance.

The Chronos verdict

The May 26 ruling from the Subsidy Advice Unit will determine whether the government’s £46.5m grant for the advanced manufacturing line gets the green light. If it does, the full financing package of £86.5m is virtually assured, including a £40m equity injection from Great British Energy. A positive outcome would open the door to a final investment decision in June.

Chronos is designed to produce 2-megawatt electrolysers, cutting costs by 40 percent compared with the current Trident systems. The long-term target is to reach 1 gigawatt of annual capacity by 2028. Rejection would delay the scale-up considerably.

Operational progress, still loss-making

ITM is making headway on the ground. First-half revenue reached £18m, and the order book swelled to £152m. Importantly, 71 percent of contracts are now classified as profitable. But the company remains loss-making, with an operating deficit of around £30m expected.

The balance sheet offers a cushion: net cash stands at nearly £200m (more precisely £197.8m in the secondary source). The company carries no debt. That liquidity, combined with the upcoming MSCI inclusion, has kept short sellers on the sidelines. Short interest is 2.92 percent of shares outstanding, a level that has not triggered a squeeze.

MSCI entry adds another demand driver

The index inclusion on May 29 is widely anticipated to generate passive buying from ETFs that track the MSCI United Kingdom Small Cap Index. Such rebalancings typically raise trading volumes and provide a liquidity boost. For ITM, the entry arrives at a moment when the stock is already tightly linked to the political narrative around hydrogen.

Beyond Chronos, the next UK hydrogen allocation round later this year could provide further impetus. ITM has already secured the FEED contract for Uniper’s Humber-H2ub project, which calls for 120 megawatts and six POSEIDON modules, with commercial operations slated for 2029.

For now, all eyes are on May 26. A green light would give the industrial scale-up more substance. A red light would strike at the very story that has driven the rally. With MSCI forced buying just days later, the stock’s path over the next fortnight could set the tone for the rest of the year.