Joke Two From Hoku

Sometimes you don't know whether to laugh, swear, or cry (and my doctor says it's bad to try all three at once). So yesterday, when I was alerted to the big announcement from Hoku Scientific (Nasdaq: HOKU  ) , I used the old uncomprehending stare.

After taking the fuel-cell industry by storm (well, not really), Hoku has decided the next big thing is solar. Thus, this press release, with an interesting lack of particulars. How will this be funded? Eh, possibly debt, possibly up-front cash payments from "potential customers."

But that's far from the only quirk in this press release.

Hoku's 30-something chairman, CEO, and president is quoted as saying, "Our plans to enter the solar power market represents [sic.] the logical extension of our business as a provider of clean energy technologies, and complements our core fuel cell business."

Pardon my French, but what a load of pate. Hoku, by my perspective, is barely a "provider of clean energy technologies." It's developing a fuel-cell membrane that's reputed to provide benefits over existing technology, but has yet to make much of a splash aside from a few research projects.

And how the two new units, Hoku Solar and Hoku Materials, "complement" the fuel-cell business is, needless to say, left unsaid.

The only obvious commonality between the two is their position as headline-grabbing latecomers in the hot, money-burning "alternative energy" sectors -- which is exactly why this solar announcement is such a joke. (Fun fact to remember: Fuel cells are not alternative -- the juice comes from oil. Nor, one could argue, do they provide much energy, since there are so few in use, despite the fact that the technology is more than 150 years old.)

Readers may or may not remember my past writing on Hoku, in which I detailed exactly why investors should steer clear of this issue -- despite the hype it got from Jim Cramer, analysts, and a seemingly interesting story about remaking the fuel-cell industry.

But is there great hope for the new venture? Sure, there's talk of a shortage of polysilicon for the solar industry. That always creates a buzz. But making this stuff isn't exactly rocket science, and the volatile pricing in this commodity biz explains exactly why there hasn't been more investment by experienced players. None of them want to get nailed with wasted capital expenditures when more production comes online, or demand slackens, or both combine to sink prices.

Which brings us to some obvious questions. Just what is ostensible fuel-cell specialist Hoku's advantage in the solar-power business? Why is it even contemplating this move, other than the lip-service justification of "diversification?"

How will it compete with polysilicon and solar providers like Mitsubishi, WackerChemie, BP (NYSE: BP  ) , Evergreen Solar (Nasdaq: ESLR  ) , SuntechSolar Power (NYSE: STP  ) , Kyocera (NYSE: KYO  ) , and Sharp? (And why is $72 million Hoku looking to build a 1,500 metric-ton plant for $250 million when Piper Jaffrey analyst Jesse Pichel -- no stranger to Hoku, or these pages -- estimated in a recent report that $250 million should build a plant with twice that capacity?)

What looked like an interesting company -- if not such an interesting investment opportunity -- is fast beginning to look like just another trend chaser. Maybe that helps explain why insiders and major holders have dumped more than a million shares of this stock since February. (Hey, at least someone's making money on this stock, right?)

That's nearly 10% of the company pushed onto an enthusiastic (or is that gullible?) group of small-timers in the market for the next home run. Trouble is, the batter doesn't seem to know where his sweet spot is. What makes anyone think this outfit will even hit the ball?

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Seth Jayson is pretty sure no one wants to share a multibillion-dollar energy idea with the little guy. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Fool rules are here.


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