Why Trina Solar Limited's Shares Jumped 28% in August

A buyout offer gave Trina Solar Limited shares a big boost last month.

Travis Hoium
Travis Hoium
Sep 9, 2016 at 1:20PM
Energy, Materials, and Utilities

Image source: Getty Images. 

What happened

Shares of solar manufacturer Trina Solar Limited (NYSE:TSL) jumped 27.5% in August, according to data provided by S&P Global Market Intelligence, after getting an offer to go private. And unlike other offers to take Chinese solar manufacturers private, this one might stick.

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So what

The offer, led by CEO Jifan Gao and joined by three other investment firms, will pay $11.60 per ADS for the company. It's also a "definitive agreement," a change from a non-binding offer made in December. Given that shares are trading over $1 below the offer price, there's still upside if the deal goes through. 

There are a number of reasons the offer could fall through and financing needs to be finalized if the buyers are using debt, but investors are buying into the offer right now. 

Now what

There are challenges ahead for solar manufacturers with panel prices falling and 2017 demand potentially falling as well. Thus, a buyout may be the best option for Trina Solar. The risk is with a deal going through, so investors should consider taking some of last month's gains off the table. Offers to take Chinese companies private have fallen through before and that could happen again with Trina Solar.

Editor's note: A previous version of this article ran under the headline: "Why Trina Solar Limited's Shares Fell 28% in August." The Fool regrets the error.