Why ReneSola Shares Plummeted

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 solar manufacturer ReneSola (NYSE: SOL  ) plunged 20% today after announcing the pricing details of its registered stock offering.

So what: Management priced its direct offering of approximately $70 million in American Depositary Shares (ADS) -- each representing two shares of the company -- at a price of $4.67 per ADS, which is about 15% below yesterday's close of $5.49. Given that wide of a discount, as well as the size of the offering, investors are obviously concerned about the sale's dilutive potential.   

Now what: The offering, which will also give investors 35% warrant coverage, with an initial exercise price of $6.04 per ADS, is expected to close on September 16. But, while some of the short-term financing risk has been lifted, the below-market sale serves as yet another reminder of ReneSola's precarious financial position. When you couple the company's ongoing losses with its still-hefty debt load, the stock is probably best left to more speculative types to play with.

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  • Report this Comment On September 11, 2013, at 2:32 PM, concoche wrote:

    How big is the dilutive aspect of this offering?

    I'm not so surprised by the discounted price of the shares: they surged last weeks to an irrational level as the company is not profitable yet.

    At the current valuation it's better to buy the shares on the market!

  • Report this Comment On September 13, 2013, at 10:10 AM, flemishinvestor wrote:

    They raised 70M$ capital with a current cap of 360M$. The dillution is about 20%, so the correction of the stock price yesterday was justified.

    The fact that they are able to raise a significant amount of capital should be regarded as quite positive. The new (insitutional) investors must believe that SOL will be profitable soon. I also think they paid a good price, regarding the recent spectacular surge of the stock price.

    I'm guessing that the stock will have a hard time going up until new profit numbers have turned into realitiy.

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