There are some very bullish bets being made by insiders in Chinese solar firms right now, making me wonder if they know something we don't. Last week JA Solar
Today, Hanwha SolarOne
Neither of these companies are models for operational effectiveness, and the bets have me wondering if management knows something about their future that we don't.
Chinese banks propping up solar
I've argued in the past that Chinese banks are at a crossroads and need to begin letting solar manufacturers fail or risk watching losses continue to grow along with competition. At the end of last quarter, JA Solar had a relatively modest $153.8 million in short-term borrowings but Hanwha was sitting on $334.0 million in short-term bank borrowings, meaning the company could go under in a heartbeat if that funding were pulled.
So why would you risk company capital or personal capital if your company's balance sheet is walking a tightrope that would result in insolvency in any other country? You must know that funding won't dry up and have extreme confidence that the business will improve.
Something doesn't smell right
I'm not sure exactly why such bullish bets were made on these two relatively weakly positioned solar companies, but it just doesn't smell right to me. Margins are terrible, losses are mounting, and their stock prices are continuing to crater. The information we've seen doesn't indicate this is a good bet, yet management seems to be going all-in. What do you think? Leave your thoughts in our comments section below.
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