Why Canadian Solar Shares Dove

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 Canadian Solar (NASDAQ: CSIQ  ) were flaring up today, falling as much as 14% after the company found itself implicated in an SEC fraud investigation.

So what: Though called Canadian Solar, the company has several subsidiaries in China, where many companies have been implicated in fraud in recent years. Last night, an SEC official said during a hearing that the accounting firm Deloitte had refused to turn over audit records from a 2010 probe. The hearing is expected to last several months, and centers around Chinese secrecy laws, which prohibit them from disclosing certain documents the SEC would need to determine if fraud took place.

Now what: It's impossible to say what the consequences of the SEC investigation will be, but the event serves as another reminder of the risk of investing in Chinese companies, particularly in solar, which were subject to their own subset of risks as Chinese solar companies has been accused of anticompetitive pricing and dumping on foreign markets. Other Chinese solar stocks have fallen as well as the news threatens the industry as a whole. Given the smoke screens in investing in Chinese solar, all but the most risk-seeking or informed investors would be mindful to stay away.

For more on Canadian Solar, just add the company to your Watchlist here.  


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