Chinese Solar Supernova, Redux

Back in March, the rumor about a Chinese subsidy for solar projects sent sagging shares skyward. As confidence grew that the rumor would become true, solar stocks continued soaring, with share prices of Yingli Green Energy (NYSE: YGE  ) , Canadian Solar (Nasdaq: CSIQ  ) , and Trina Solar (NYSE: TSL  ) all tripling by early June.

Guess what happened when the government announced its subsidy program for ground-mounted solar systems on Tuesday? Investors bid up the stocks again! So much for "buy the rumor, sell the news."

Bottom line, there was nothing terribly unexpected about the program, which covers 50% to 70% of the cost of a solar installation. I would have told you before Tuesday that the effects of a Chinese solar subsidy were baked into the share prices of stocks like Yingli and LDK Solar (NYSE: LDK  ) . Yet, there they went, running up by double digits.

Even First Solar (Nasdaq: FSLR  ) gained nearly 6% Tuesday. Does anyone really believe that well-positioned American companies like First Solar and SunPower (Nasdaq: SPWRA  ) are going to win bids over native solar shops like Suntech Power (NYSE: STP  ) ? I really can't see it. Not in the early days, at least.

In short, it was a great day to sell some solar stock. That's exactly what I expect the companies themselves to do in the weeks and months ahead.

No, I don't mean the insiders' personal holdings. I'm referring to the inevitable secondary stock offerings, as the less well-capitalized companies strive to get out from under their uncomfortable debt loads. Remember Suntech's significant dilution back in May? Or has all the fanfare about 500-megawatt strategic agreements caused that memory to fade? Anyway, you should expect more of the same.