American Superconductor Gets a Lifeline

Since American Superconductor's (Nasdaq: AMSC  ) largest customer stabbed it in the back, there hasn't been a lot of positive news for the company. Financing for The Switch acquisition never materialized, leaving the company with a lost deposit on the acquisition. The company's promising pipeline of products has yet to yield revenue that can bring it back to profitability in the absence of Sinovel.

But this week, the company got a financing lifeline, a possible sign that investors are willing to put some money down on the company. An unidentified investor bought $25 million of 7% convertible notes and warrants in the company, with a company option to require another $15 million purchase. This could be a bridge to the future, if the company's products can begin selling again.

American Superconductor has been hit hard on two fronts -- its wind business and its emerging inverter business. In wind, Chinese manufacturers have entered the market with a vengeance and the financial crisis dried up financing for the renewable resource. Even big players like Vestas, GE (NYSE: GE  ) , and Siemens (NYSE: SI  ) have run into weaker-than-expected demand as well, and profits in their businesses have suffered.

In the inverter business, nearly everyone is suffering. Falling costs in both solar and wind have meant that pricing pressure comes down hard on established players like Power-One (Nasdaq: PWER  ) , leaving little room for newcomers. American Superconductor still has hope for this business as utility-scale installations grow, but for now it's just hope.

No turnaround yet
I'm not suggesting that this is a sign that American Superconductor's fortunes are turning around, but it's at least a sign that investors are willing to take a small chance on the company. It's a long road ahead, but any good sign the company gets is good for investors.

Interested in reading more about American Superconductor? Click here to add it to My Watchlist, which will find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium owns call options in American Superconductor. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Power-One. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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