Why Suntech's Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Suntech Power (NASDAQOTH: STPFQ  ) fell 23% today on concerns the company will go bankrupt.

So what: Suntech has a $541 million bond payment due on Friday, and even though 60% of bondholders have agreed to a delay in payment, it appears 40% may force the company into bankruptcy. Bloomberg is reporting that China's central government won't bail out the company and sees it as a healthy sign for solar if Suntech goes bankrupt.  

During the day today, there were rumors that the local government would somehow rescue the company, but that is pure speculation at this point. No matter what, equity holders are in trouble.

Now what: I've been negative on solar stocks for a long time now, and this is exactly why. Suntech had too much debt and was losing too much money to survive. It's unclear if Suntech will be in bankruptcy court voluntarily or involuntarily, or whether it'll just be sued by bondholders, but this will come to a head on Friday. No reason to buy Suntech now, and I'd stay away from all Chinese solar stocks, because this won't be the last one to meet this fate.

Interested in more info on Suntech Power? Add it to your watchlist by clicking here.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2311262, ~/Articles/ArticleHandler.aspx, 8/1/2014 5:50:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement