What happened 

Shares of Chinese solar manufacturing giant JinkoSolar Holding Co., Ltd. (NYSE:JKS) plunged as much as 10.8% in trading Wednesday after the company announced a large sale of stock. The company tried to give investors confidence management was all-in, adding a $35 million purchase of shares by the CEO and chairman of the board, but shares were still off 8.6% as of 11:55 a.m. EST. 

So what

JinkoSolar offered 3.6 million American depositary shares (ADSs) to public markets and sold another $35 million of ordinary shares to chairman Xiande Li and CEO Kangping Chen in a separate offering. Bankers have the option to purchase another 540,000 ADSs to cover over-allotments. 

Large solar farm in a grassy field.

Image source: Getty Images.

The price of the ADS offering was $18.15, which means the total offering will raise about $100.3 million, minus fees before the over-allotment. According to management, the money will be used to build a U.S. manufacturing facility and for working capital. 

Now what

The dilution will increase shares outstanding by about 17%, which is what investors are concerned about today. If JinkoSolar doesn't have the cash flow to build a plant in the U.S., it may not be a wise decision to offer shares to build one given the short-term nature of the potential benefit of manufacturing here. I think this shows that JinkoSolar wants to be the biggest, but maybe not the most profitable, solar manufacturer in the world, which is a big reason to stay away from the stock. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.