Ok, so their Market Cap is only $4 Billion, but they are much bigger than that in spirit.
When they need Lawyers, they con't just go to a medium sized company to defend their interests, they go to the best there is.
Simpson Thacher Advises The Blackstone Group on Its Landmark IPO
Firm Represents VMware Board in Company's $957 Million Carve-Out IPO
Simpson Thacher Advising Dow Jones Board of Directors in Announced Sale to News Corp.
These guys are top notch.
Tuesday, October 30, 2007
Ok, so their Market Cap is only $4 Billion, but they are much bigger than that in spirit.
Basically LDK is saying:
"you want us? you'll have to get through these guys."
**Points at lawyer one, lawyer two, lawyer three, and lawyer four**
"Meanwhile we're going to get back to business."
Ok, back to what I was doing: Reading Sun Tzu's Ancient Art of War.
Saturday, October 27, 2007
PBS is on behind me for the last couple of hours.
I've heard a interviewee talk about Global Warming.
I've heard stock analysts talk about growth in Chinese stocks.
I've heard "Nova" document Solar Power.
I've heard that analysts are talking about $100 / barrel of oil
At other times I've had CNBC on behind me.
I've heard and seen BP commercials spotlighting solar energy.
I've heard TJ Rogers claim that demand for Polysilicon is "Infinite."
I've heard numerous references to staggering Chinese economic growth.
It's all over the place, and I'm not alone in hearing this stuff.
Previous thinking, and a couple of references can be found here.
Imagine that some kind of fear descends on some company. This creates downward pressure on the stock, because Buyers are naturally afraid to buy. Now, normally the price would hit some level where buyers would reappear because it would be considered a fair deal. In the case where the shorts are attacking, the buyers fail to stop the price from dropping, because there’s an influx of naked virtual shares (supply up / demand constant* means decreased price).
Longs that have been with the company since before the collapse sell many of their real shares to buyers who are buying them at ever-lower prices. Some of the buyers, of course, are the same people that are helping to bring the price down with virtual shares, but they’re not covering those shorts, they’re collecting shares (** and ***). Some Shorts may even own virtual shares manufactured by other Naked Shorters (in their long portfolio). There’s really not even reason that a naked shorter couldn’t own a virtual share (in a long account) that he had himself had produced (by prior Naked Selling), but of course, those two shares will neutralize each others' values on the way back up.
Every time a Naked Short covers a short sale, a share of stock is delivered to some buyer, and a virtual share disappears from the system; the total count of shares thus decreases (supply down / demand constant or increasing means increased price).
* Or, “as expected under normal conditions.”
** Assuming that the company that they’re buying into is real. The long / short ratios that they will gravitate to will depend on their perception of the fair value of the company.
*** If they cover the short, they put upward pressure on the stock, and defeat the purpose of the attack, as the price can’t be forced as far down, and longs are less fearful of losing everything, and are less willing to sell at low, low prices.
Friday, October 26, 2007
Obviously of late, I've been preoccupied with the whole drama, but that doesn't mean that I denigrate the American competition.
I've always figured that where China can win with down and dirty silicon tech, America had the capacity to make the sleek high-tech forms like thin film. Right now I particularly like ASTI as an American manufacturer. They're supposed to start selling a product line in November, and that's a significant forward step.
As for on my own home, I'd love to have something nice from Sunpower.
Thursday, October 25, 2007
The Naked Shorts are getting out, and they're getting out cheap. There are still shorts aplenty, though, for a nice squeeze.
The sidelines are now a critical factor. On the yahoo board is some German representation, which is nice to see, because for everyone that's long, not just in America, but in the World, there are a few that are watching and waiting. Beyond just all of the people that are currently aware of the situation, there are a hell of alot of people that aren't watching at all, but will start watching when the price goes up, and fast. Then they'll be taking a real look at the situation, or at least the spin of the situation.
There's no doubt that this is going to bounce, the question is, when are the big fish going to stop trying to shake out shares, and exactly what are they going to do when they decide that the point of maximum short profit is reached.
Depending on what the news contains, the topetty tops are perfectly capable of turning on Situ in a heartbeat. He's only a fired, disgruntled worker, right? In fact, Situ is just the kind of guy that they wouldn't be naturally allied with anyway. He's the type that would rat out his company to the stockholder using stolen company data. (In any case, he's probably going to come out of this with alot of money)
They want to make money, so assuming that LDK is real (as it is) they know that there's got to be a bottom, and that once they've found it they know that it will naturally move back up. The P/E is down to 13.36, which, compared to a company like FSLR at P/E = 179.93, or SPWR at P/E = 534.64, is complete insanity; assuming that LDK is a real company with real products and rapid growth, (which it is).
Remember what TJ Rogers of Cyprus said about the Polysilicon Business, "DEMAND INFINITE."
So, whenever news comes out, and the uncertainty is dispelled, investors around the world are going to start trying to find a fair value for the stock (keeping the news in mind, of course).
Projecting the value of a share of LDK stock to the P/E of other industry players gives a range of prices per share: Compared to FSLR, LDK would be $496.02, compared to Trina Solar, LDK would be worth $165.54 per share, and to stretch it to SPWR we're looking at $1477 per share. This is, of course, assuming that LDK is a real company (which it is), and also assuming that the earnings valuations are not decreased by the upcoming inventory (This may in fact be a negative).
Now, consider the following: Just today Suntech Power went up 16% on news of a new polysilicon supply. LDK has over $2 Billion dollars in contracts to support becoming a premier polysilicon supplier. They're flattening the ground right now, and Fluor (an entirely legit and respected American engineering company) is at work on the project. It just so happens that LDK is sitting pretty much directly on top of a huge supply of high-quality silicon deposits.
I could go on and on... but I'll just leave this one with a disclaimer: We each are ultimately responsible for our own decisions. I can accept no responsibility for any losses that might result from your decisions. I believe that my facts here are correct, and I also believe that my core assumptions are correct. I may, however, be completely and dreadfully wrong.
Wednesday, October 24, 2007
In this situation, who has shown the greatest amount of rational consideration? The Hedge Funds who shorted, and shorted, and shorted, and shorted, and shorted, on a single rumor from Situ, or LDK's CEO, who kept business selling like gangbusters, and kept his mouth shut until he had facts to speak of?
I'll bet that there are some sweaty Fund Managers right now, and they're getting sweatier by the day. They can't trust each other, of course; each one of them knows that his "allies" will drop out of this drama at any time if they think it's in their best interest, and the fact that their friends are about to be screwed isn't going to stop them.
Tuesday, October 23, 2007
In the practice of Tai Chi, the correct response to force is to yield.
It's interesting that the CEO hasn't spoken at all on this issue. There are a couple of reasons that he might be quiet. He could be perpetrating fraud. I don't think so. Reading the most recent WSJ article on him suggests that he's extremely driven, with a very powerful will. He's not one to tolerate poor performance. Another possibility is that he's just letting the opposition expend its energy while he prepares the case to counterattack while they are fully extended.
I prefer the second option, as you might guess, and that's why I entitled this post as Idle Speculation.
I originally thought that Chinese interests would defend this stock, and I think that they might have tried at around $45. I'm sure that this, though, is a bear run without the uptick rule to limit shorting, and with naked shorts creating additional downward pressure. There's no way to keep the price up by buying into it, they can still drive it down. The only way to beat the shorts is to change the psychology and scare them away. As I’ve been working out how Naked Shorting must work, I’ve come to the conclusion that as long as the Naked Shorts are manufacturing shares, you can buy all the shares that you have money for and still not stop the downward momentum; they can just sell more virtual shares.
The critical factors in this situation are as follows: How many shares of stock are currently owned by the strongest hands (including Chinese national supporters)? How many virtual shares are out there, for which Naked Short sellers are on the hook to buy? How much pressure is there within the regulatory system to force those Naked Sellers to cover their sales?
Imagine what could happen if very strong hands held onto more than 20 Million (or so) shares of stock, when Naked Shorts were required to buy and cover? Essentially, since Naked Shorting dilutes the stock, if all of those shorts were properly covered then at the end the number of shares available would be reduced to the original value. In the case that Naked Shorts were required to cover, then the price of the stock would be limited only by the strength of the hands holding stock that Shorts would be required to buy.
Here's some thinking on Naked Shorting.
First, some references:
Wikipedia on Naked Shorting
SEC: Key Points about Regulation SHO
Here's my attempt at putting the situation in layman's terms (I'm a layman, so those are the terms that I understand). Feel free to correct me if I'm wrong (but say why, please).
Consider the players named "Buyer", "Seller", "Broker", and "Unwitting Accomplice."
In a normal short transaction, "Seller" borrows a share from "Broker". "Broker" lends the share to "Seller" by borrowing it from "Unwitting Accomplice" (a client). "Seller" then sells the share to "Buyer" at the present price. "Seller" delivers that stock to "Buyer" upon the sale (within the normal timeframe for trades). "Seller" now owes "Broker" the price of a share of stock. Everybody is pretty much happy, and the number of shares on the market is conserved.
In a Naked transaction, "Seller" sells "Buyer" a share of stock, but the stock is not delivered. The stock can only be delivered when "Seller" covers the short and buys a share of stock from someone else.
Now the reason this all works is because there is no real delivery involved. I don't notice that my shares are being lent out. I don't notice if I bought a share of stock from someone who doesn't actually have a share of stock to hand to me. The system works because all of these transactions are in the form of electronic data at The Depository Trust Company (DTCC) (as far as I can tell). Their computer system logs of the transactions involved, and follows every line of stock ownership, and since "delivery" can take time, then it's no problem how many transactions the stock goes through, because at the end of the day for every share of stock there's an owner. There's also no problem with a Naked Short as long as nobody complains about the fact that there's no stock down the line to be delivered.
Now, once again in the Naked scenario, "Buyer" has bought a share of stock from "Seller," though "Seller" doesn't actually own a share of stock to sell.
Essentially "Seller" has just manufactured a virtual share of stock. That stock doesn't exist in reality but "Buyer" does legally own it. For example, if there were originally 20 Million shares of stock available for trade, and "Seller" sold a single share in a Naked transaction, then there would then be 2 Million plus one share available for circulation.
At the end of the day, the stock is diluted and less valuable.
Stock valuations are inherently market based, or at least there are rules associated with dilution. There are only a limited number of them available, and if everybody wants them then they are supposed to go up in price. However, as long as the Naked shorter can avoid covering their sales, then they have essentially increased the supply, and given a constant demand, the price will go down. It's as if we each had the right to create US dollars, put them into the system, and pay them back whenever we wanted to or maybe not at all.
Hedge funds have been doing this to little companies for quite some time, and as long as nobody is powerful enough to make them stop, then they'll keep doing it. You can pretty much bet that anybody who understands what's going on, yet still supports it, is making a profit from Naked Shorting.
* Per this claim by Byrne on the Wall Street Bailout these records might very well not be recorded by the DTCC, which basically makes it virtually impossible to track the undelievered shares.
Now comes LDK.
Over the last couple weeks roughly 215 Million shares of LDK stock have been bought. A few weeks ago there were approximately 20 Million legit shares of LDK stock available for transactions. The stock is now on the Naked Threshold List, and today there are more than 20 Million shares of LDK stock that are legally owned by somebody. DTCC could tell us how many, but that's very unlikely.
There's a new rule on the books which requires that Naked Shorts to cover their sales within 13 days, but the questions include; how many Shorting entities are exempt from this rule, as well as how stringent will the regulating agencies be in holding their friends to these rules (even in the case that their friends lose money).
If I were LDK, I'd be talking to my allies in the Chinese Government, and I'd make sure that it was understood by the US regulators that there is an expectation of strict accordance with SEC regulations in terms of Naked Shorting, and that they will agressively seek the prosecution of anyone involved in illegal trading of this stock. The Chinese Government is not a small fish in today's world, and given the choice between leaving LDK alone and engaging in a trade war that the US business elite have the most to lose from, I think that the choice would involve alot of covering.
Friday, October 19, 2007
We need silicon, plain and simple.
The facilities for silicon are expensive and complicated. The cost of silicon is holding down the entire industry, by holding up the price of the final product.
American companies are not leading the charge. HOKU has announced plans to build a polysilicon plant in Idaho, but they are not well funded, and are on a lengthy timespan for implementation. American companies that currently produce "chips," like Cyprus Semiconductor and MEMC are enjoying the profits due to surrent prices, and are not demonstrating the vision required to take Silicon manufacturing to the next stage (the stage beyond computing).
Mr. Peng has vision of scale, and he has developed the plans for implementation on a rapid timescale.
Problematic is the fact that America is choosing not to make the moves required to be competitive in this industry, and companies like MEMC stand to lose money if LDK is successful in their plans to produce a large quantity of polysilicon. However, it should be remembered that there are American companies that benefit, such as Sunpower, Spire, Evergreen Solar, as well as all of the jobs available selling and installing silicon-based solar technology.
Partial Eclipse: LDK Solar
Highlights China Stocks' Risk
This is a picture of a driven and capable man.
He's fluent in Japanese, he's traveled Europe and America, he's built up a company of 12,000 people, he knows to get good people behind him, and he's successfully gotten the Government and local people behind him.
This is not a man who is thinking to perpetrate fraud. He didn't build his previous on fraud (nobody hires 12,000 people to do nothing, not even (or especially) in China).
As important as any of these, he's got a big vision. He lives in a vast country of 1.3 Billion people, and he's looking to build an industry to scale.
I've had a small amount of money in ESLR for about two years. Prior to that the only time I've invested was right at the end of the dotcom boom. My main activity started at the end of March with the addition of a significant chunk of money to my account.
With a degree in physics, it could be said that I've been studying energy pretty thoroughly since about 1996, but my drive towards alternative energy really kicked in soon after 9/11.
Since March I've ranged from about -10% to +60%. Right now I'm at about +10% after taxes.
Watching this LDK drama is incredibly fascinating.
For one thing, I'm learning that to sell a good company because the price is down is the height of foolishness. You can only do that so many times before you will have nothing.
For another thing, I've learned that you can't trust the reporters. They all have their own motives, and know very well their effect on the markets. You gotta do your own work, and get as close to your own truth as possible.
Note that after close today the WSJ put out quite a friendly article on LDK ( Partial Eclipse: LDK Solar
Highlights China Stocks' Risk
This morning I was way down, not just in LDK, but in AKNS and ASTI. I felt great and confident, however. By the end of the day, I was pretty burnt out, but still feeling good, because I'd not gotten afraid and sold out. Yes, I sold FSLR at a gain, and I sold some ASTI at a profit. I was concerned about my available margin. I figure that as long as I'm not forced to sell, then I've got no problems.
We're still just getting started in putting together an industry, but it's a critical industry, and the long term is white hot. My ultimate goal must be to stay in until it's ready to pay me off for my patience.
These guys on CNBC are freakin' clueless. I don't usually watch it, I do my own work.
These "serious" analysts are just throwing out companies... probably the companies that they own.
One very old analyst likes Yahoo Japan (don't know the ticker and don't really care), but can't seem to describe what it is.
One fellow who's introduced as a "bear" wants you to buy beat up companies like financials and homebuilders. One gets the sense that the guy might be a bear because he owns a bunch of financials and homebuilders.
The Next guy, thinks Alcohol and Entertainment is the way to do. He doesn't seem to be able to complete a sentence, so yeah, I think he's been buying into alcohol of late.
Bah, what's really sad is that I'm dependent on the same economy that these guys are "analysing." Their misplaced priorities affect my future, whether I like it or not.
Thursday, October 18, 2007
I made use of a time-honored method of divination the other day (at least in my circle of D&D friends), and I rolled a d12 to determine what kind of report to expect. I was calling 1-3 an excellent report.
I rolled a 4.
So there you go. In the end, we're all good, though there are some rocks in our path.
Disclaimer: Rolling dice to predict the future is fraught with risk. The reader is responsible for their own actions in response to divinatory guidance.
This time instead of selling out on WSJ news, I bought.
If the quotes attributed to LDK execs were the most incriminating to be found in the tape, then we're in very good shape.
Here's the article.
This isn't even spun negatively by the WSJ, though the price reacted to the initial hit, particularly since for the first short time there was only a short blurb available to non-subscribers.
In the LDK conference call, a copy of which was reviewed by The Wall Street Journal, two officials of LDK -- Yao Qiqiang, vice president of accounting, and Liu Yizheng, an accounting manager -- and Mr. Situ himself discuss the quality of the feedstock with Mr. Lai.
"What the accounting department needs to do is a categorization of the inventory in terms of life and ways in which it was purchased … and hand it over to the technology team for a review. Let them decide whether it is usable or not," Mr. Yao says on the recording.
On the call, held on Sept. 13, Mr. Situ estimates that two-thirds of the company's feedstock is older than 180 days, making it unsuitable for processing into wafers. He says the company needs to reflect this by taking a charge on its financial records.
Responding to further questions from Mr. Lai about why the feedstock cannot be used, Mr. Liu explains that some of the inventory is leftovers of silicon that has already undergone testing by the production team.
"I think you should do some careful data analysis" to determine the quality of the inventory, Mr. Lai responds.
Essentially, Situ says that alot of feedstock is older than 180 days. Now, that could be an indication of the quality of the material, but he gives no analysis of how it should be valued.
Mr. Lai tells him to do some "careful data analysis."
So, basically in this blurb we have the CFO telling the accounting manager and controller, that they need to put together data on the issue. Sounds like something a reasonable CFO would order in such a situation. How are they going to know what they have and what it's value is without data analysis.
There are a couple of different possibilities (there always are). It's pretty well known (it was anyway) that LDK had money, and was one of the more successful companies in terms of incoming silicon supply. There was no other way for them to be fulfilling the orders that they were taking.
Though Mr. Liu, the Accounting Manager, states that some of the material has already undergone testing, it's not clear how much silicon was in this category, and Situ's statement is of no help at all.
Silicon could be getting old because it had been searched through many times for usable scraps, and then pushed into the back as useless material, or it could be getting old because there were enough materials coming in the door that there was no need to complete the exhaustive effort to completely deplete the useful silicon content from the incoming shipments. Remember, workers at LDK are manually pulling useful materials from the bulk of the material, and in many cases it is going to be much more efficient to get the first 90% of the good material than it would be to spend the time to get that last 10%. Is a stack of material containing the last 10% of usable silicon going to be worth nothing? No, because it still contains recoverable silicon, it will simply be more expensive to find those last useful pieces.
Of course, I don't know how much of what is sitting in LDK's yard, and I'm thinking that LDK, up to the point of this audit, hassn't known either. This has struck me as quite a plausable reason for taking a bit long on the inventory. It's all a grey area, and they are going to be working with the auditors to find a system with which to value this silicon containing material, where none has existed before.
What they do know is that they have alot of material moving through every day, and that they're making a shitload of money.
I'm happy to have bought a bit more today on the dip.
Wednesday, October 17, 2007
Morgan Stanley thinks ethanol makers, as well as solar energy companies, have a lot of long-term potential, a contrast from peer firms that have recently rolled back ratings and earnings estimates for the group amid falling ethanol prices and rising corn prices.
Analyst David Edwards started coverage of the clean energy industry with an "Attractive" view.
"The global risks posed by climate change are driving spending and investment in clean energy solutions, which (unlike the oil shock that spawned the first wave of alternative energy solutions in the 1970s) is durable and accelerating," he wrote in note to investors.
He sees the "annual clean energy revenue opportunity" reaching $500 billion in 2020 and $1 trillion in 2030.
Of the 10 clean energy companies Edwards highlighted, three -- First Solar, SunPower and EnerNOC -- hit new highs Wednesday.
I lightened my position on LDK today, but I still think that if it waits until Friday then people will forget about their impatience.
The fact is that this is going to be a tough and nuanced inventory, with alot of value riding on percentage chances of certain materials being recoverable by future processes.
I don't know, but it's very possible that when LDK says that they'll be able to recover presently failed wafers, they're going to have to demonstrate the science to auditors, either in a lab, or by detailed interviews of those involved, maybe both.
Personally, I think that alot is riding on the success of their upcoming Polysilicon plant, and I suspect that that is going to be the ultimate answer to how they plan to recycle the failed inventory.
It seems that the problem is as follows: The wafer is doped with other elements in order to produce a juncture between positive and negative halfs of the material. Once you've doped up the silicon, and found that for whatever reason it's failed, you can't just melt down the failed wafer and rebuild it because you've mixed up the positive and negative doping. I can, however, imagine that given the equipment to process pure silicon from rocks, you could also chose to recycle doped silicon by removing the impurities that have been introduced. The ultimate question would be whether the recycling of used wafers would have a cost benefit over purifying silicon from the usual mined material. I don't know the answer, but it seems plausable to me.
Saturday, October 13, 2007
Friday, October 12, 2007
Monday, October 8, 2007
I'm going to hold through this.
LDK is real. There is absolutely no doubt about that. I've spent too much time recently watching the boards and reading the fearsome statements of the shorts. This thing is, though, that the shorts are just taunting. They want the longs to get excited and sell their stock at low low prices, and many of them will say whatever they think might scare a long to take a loss to their benefit. I'm not saying that there's no value in having shorts out there raising real flags and warnings, but during these emotional times they are like sharks. I've seen so many pure, shameless fabrications out there in the last hours, that sometimes it's hard to keep the few real pieces of information in perspective with the big picture.
LDK is making deals. They have product. They have profit. They have powerful connections. They have Government support.
Consider the Sunways Reactor deal. Sunways bought the Reactors, and apparently has them available right away. Sunways was going to use them themselves, but LDK made a deal by which LDK takes the reactors and supplies Sunways with wafers over 10 years. Sounds to me like LDK went to Sunways and said "We can make better use of that equipment than you, you give us the hardware, and we'll give you a fair value of product, and everyone benefits." Sounds like a good deal to me, it also sounds like a smart deal.
So, this company isn't going away. Hell, the bottom line is, that if this stock is going to go to zero as the sharks would have you think, LDK is going to have to become alot less profitable.
Some time this week, LDK is going to release a statement, and the shorts are going to have to cover before they even get a chance to read the thing. Hell, LDK should put the thing out in Chinese-only just to piss off some people, maybe with a bit of preface from Sun Tzu. The fact is that the available shares of stock are getting more and more concentrated in strong hands who know the value of what they're holding. Though the long term may remain volatile, it seems quite safe to say that some time this week the tide is going to turn on the sharks.
I'm starting to worry about that decision, though. Not because I think that LDK is another Enron, but because I'm increasingly convinced that this is more about American traders beating up a Chinese stock than it is about the fundamental capacity of the company itself.
If that's the case, then its going to be that much harder for LDK to recover, even on good news, because they will continue to be a target.
Also if that's true, it pisses me off, because the last thing we need in this world is a market war in the alt-energy industry. Nationalism has no place in the world response to Global Warming and Energy Security, and American Solar stocks don't benefit from retaliatory Chinese motivations.
LDK needs to come out with a strong statement, and soon, in order to stop this retreat.
As of now, they've said very little about the reality "on the ground." Yes, they are putting together an official report for the SEC, but for the immediate investors, at least, they should really put out some non-binding statement, at least to describe the nature of the allegations. They should out out a Polisilicon 101 document, to describe what exactly is it that they do, how the scrap fits into the business plan, and what their long terms plans are with scrap that they cannot immediately process. At least such a response would give investors a break from the fear generated by the numerous shorts out there.
I've given this alot of thought, and I'm going to predict that the shorts are going to get their asses kicked this week on LDK.
What I'm seeing is the possibility that this situation has become an American vs. Chinese argument in many cases. I believe that much of the selloff last week was timed by certain parties in America specifically to crush this stock. The Barron's article that has been going around demonstrates a level of prejudice against the Chinese roots of this company, and a has a basis in a lack of consideration to the real strength being shown by LDK. In other news, Jim Cramer seems to want us to sell LDK, and buy MEMC, irrespective of the fact that the chances of MEMC being able to match LDK on future margins or output are close to zero (In America, you have to figure out how to do the job with the very least possible number of actual employees; In China, if you need 5000 people to get the job done, you bring in 5000 people, and they get the job done).
In the end, Chinese investors are not going to let this "flagship" stock get beaten down, and thus bring a loss of face to members of the Chinese solar industry. There will be significant forces acting to protect the price of this stock just from a Chinese National perspective. In addition, LDK is undoubtedly very well connected in China and increasingly in Europe, and will be pulling in support from entirely new sources at these prices (and with the publicity).
That said, remember I'm guessing. I've been wrong about things before. This may or may not end up as one of them. Your decisions are your own, and I cannot be held liable.
Friday, October 5, 2007
On the 28th of last month I wrote the following on the Raging Bull Board:
So, CPTC didn't announce a 60Hz certification.
I'll say that I'm somewhat disappointed.
It seems to me increasingly likely that there is, in fact, something funky going on at CPTC, which is a shame, because I've seen nothing to suggest that their products themselves are not top notch.
So, what's going on.
Why aren't they selling turbines? I'm pretty sure that in this market the turbines should be selling themselves.
Ok, so they made the last two 8.2's in Germany. Yes, this is odd. I'm guessing that the only people that know how to build them are in Germany right now, and that knowledge is going to have to be transferred over to the US. It's a guess, but it would partially explain why they've got no big sales yet. If true, however, it would be a temporary holdup, given proper management of the situation. Given a sample turbine, the training center in Sweetwater should be able to reproduce the turbine pretty readily, and it's likely true that there were American Staff on hand in Germany during the manufacture stage.
I suspect that at some point this company is going to really take off. On the other hand, they don't seem to be on the fast track for it.
I'm still in right now, but I think for my own safety, I don't have the luxury of staying solidly and confidently long until they put out some real proof that they're moving forward. I don't want to sell, because the next day news could bring me alot of money, but I see companies in Solar that are definately moving forward; companies where it is clear that the leadership wants to drive up sales and develop working relationships (not just investment relationships), and which are in equally potent market niche's.
Barring excellent news in the next two weeks, I'll be lightening my position on CPTC.
A few days ago, I did lighten up my position, and am quite glad that I did. I'm feeling more secure, not being so dependent on the motives and capabilities of those in in charge of that company.
I'll be watching for news, and will take advantage of that news as I can, but right now I can't be confident in the Management.
I did end up ahead, and as I say, I didn't get out completely. I think that if they put out some very good news, then they very well could go up over $3.00 per share. I'm just not going to count on it, or wait around forever for it.
There has been some good news in terms of some big positions placed on the company by a very large hedge fund run by a fellow named Israel Englander (referenced way down the Raging Bull Board), but I need some proof in the form of sales before I can feel safe.
First off, there's Exxon. To quite a significant extent, Exxon is the Dow.
One of the first companies that I was excited about when I got into this whole thing was Spire. I sold out at a loss and went on to better things. Since then, however, they've made a deal with a Taiwanese company, and they're stock has been moving pretty regularly. If I had stayed in I'd still be in great shape.
I like TSL, though I haven't owned any in some time. On the Chinese front right now I'm in LDK (having just bought in after the recent crash - some risk there).
I've bought into Sunpower previously, though I own none now. Their investor base doesn't seem to be the most enthusiastic, but obviously somebody is keeping the pressure up.
First Solar, of course, is the stock that everybody has been expecting to collapse for six months, but it seems to be back on the rampage. Mostly owned by the Walton kids, it has powerful support.
Sure, there are some losers in the bunch. There are companies that have run into silicon supply problems (CSUN), and there are companies that have been unable to get manufacturing up and running (DSTI), but as it stands so far this year, at least, the Solar industry is blasting off and leaving returns from the Dow in the dust.
Thursday, October 4, 2007
The site has a low pagerank, but the author (Jennifer Kho) seems to be prolific and very knowledgable about the industry, and has written for many sources (example: www.redherring.com).
In particular, I like this bit about the Silicon Situation:
Michael Rogol, managing director of Photon Consulting, said measuring silicon inventories is more complicated than one might think.
"Accounting for silicon inventories is like accounting for crude oil reserves in that different inventories and different reserves have different risks associated with them," he said.
Some of the silicon has impurities that make it difficult or impossible to use as is, yet companies expect they will be able to use the silicon once they figure out how to remove those impurities, Rogol said, adding that LDK and Renesolar have been particularly successful in removing impurities.
"This issue is complex because LDK is very good at using silicon that other companies often can't use," he said. "What one company would call waste silicon and write off, LDK is sometimes able to turn into solar wafers. … That makes it harder to account for the silicon."
Rogol said when he visited LDK's silicon storage area in the past, he's been impressed by the amount of silicon it had. "It's one of the biggest silicon stores in the world," he said.
Rogol added that he's seen nothing to indicate a discrepancy so far.
"My experience with the company has been that everything they've shared with me has matched what I've seen when I've visited their plant," he said. "That does not mean they couldn't have a problem or couldn't have a discrepancy, but so far, I haven't seen any evidence that supports it.
Today I bought into LDK at around $50 and $46. For the day I ended ok, but the future is hazy.
On the one hand, it's recognized that overreactions during such events are common. Also, margin calls have forced the price even further down.
The question, in the end, is whether the leadership at LDK is really crooked, or whether the fired employee is lying.
I'm tending to put more weight in the company. Yes, they have announced very large plans for expansion of their manufacturing capacity and their move into Silicon, so there is definite "forward looking" at LDK. On the other hand, they have what appears to be a great supply of very real contracts (and income). It's not like they're in a business like Enron, where they could manipulate markets, hide losses, and not get noticed. They're manufacturing PV Wafers. They've got a factory; material goes in, and finished product comes out. They're doing business with a growing number of Major companies like Applied Materials, and Suntech Power, and there is little corporate incentive to make claims that they can't support, as their customers will be expecting actual physical deliveries.
On the other hand, people sometimes become trapped into deception through expectations. If their supply of Silicon is short, maybe they have tried to keep it quiet, in order to not shake up the stock price.
Back to the other hand, they went public quite recently, and so would have been investigated quite recently by the NYSE as well as Morgan Stanley and their other investment bankers.
If it turns out that this fellow is right, then LDK is going to continue to be hurting. They'll still be around probably, as long as they can continue to manufacture, but they'll be heavily downgraded. If it turns out that the fellow was being vindictive, then the stock will shoot back up.
Wednesday, October 3, 2007
Peter Lyons, a Nuclear Regulatory COmmittee Commissioner is talking about needing help from Congress regarding the details of a plan to consolidate and develop nuclear power plants. It seems that a combination of the requirement for a 2+ mile surrounding area, and a high per foot cost of land, creates complications to the implementation of the plan.
Makes sense to me, and is one more argument against nuclear power.
Bernie Sanders (I-VT) is making the most sense of the bunch. Democrats are supportive of nuclear power, because there's money in it. In the end, though, the money spent on nuclear power plants is misspent, and without taxpayer support would be nonexistant. Not only that, but nobody is talking abou the waste (except Sanders). It's simply ignored.
If you haven't noticed the movement today, check it out. It's ugly.
Here's a brief on the issue.
I didn't own any, but I certainly didn't expect this, and I've been watching it potentially looking for a buying opportunity.
I'm not sure that this is it, or not. I think I'm not going to get too excited about jumping in until there's a bit more info forthcoming, though this might lose me some money in case of a bounce. I believe that it's likely that they'll recover quite nicely, as they still appear to be a real workhorse in the industry.
I'm sorry for those that are in the hole right now by this news.