Babcock & Wilcox Enterprises Inc. (NYSE:BW) saw its stock drop 9.6% on Thursday after a short seller published a report challenging the credibility of the company’s $2.4 billion agreement with Base Electron.
The short seller’s note claims the deal - a design-build contract announced by B&W earlier this month - faces unresolved questions that could prevent it from being realized. The contract in question calls for B&W to deliver 1.2 gigawatts of new generation capacity, comprised of four 300-megawatt natural gas-fired boilers and steam turbine generator systems. Those systems were described as intended to provide power to Applied Digital AI Factory campuses.
Among the points raised in the short seller report is the observation that Base Electron and B. Riley Financial (NASDAQ:RILY) list the same Santa Monica address. The report further notes that Bryant Riley serves as a director of Base Electron, and identifies B. Riley Financial as a B&W shareholder.
The report also highlights the timing of Base Electron’s creation, stating it was formed in December 2025 - after B&W’s November announcement of a limited notice to proceed for the project. The short seller flagged this sequence as relevant to assessing the contract’s substance.
Another area of contention presented in the note concerns how Base Electron’s relationship with Applied Digital (NASDAQ:APLD) has been described. According to the short seller, B&W has referred to Base Electron as a "subsidiary," while Applied Digital has characterized Base Electron as an "independent" company in which Applied Digital holds a 10% equity stake.
The short seller also questioned whether Applied Digital would ultimately contract B&W for the project. It cited local meeting records for Applied Digital’s Louisiana and South Dakota projects that, the report says, indicate plans to use grid power rather than on-site generation provided by B&W.
Finally, the report points out a contractual feature that could limit long-term backing: Applied Digital’s guarantee of Base Electron’s obligations would terminate if Base Electron completes a financing round of $50 million or more, or if it becomes a public company.
These allegations followed B&W’s announcement that it had received full notice to proceed on the design-build agreement with Base Electron, covering the 1.2-gigawatt capacity project that includes the four 300-megawatt natural gas-fired boiler and steam turbine generator systems intended to supply power to Applied Digital AI Factory campuses.