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Why First Solar Stock Dropped 10% This Morning

By Rich Smith – Sep 17, 2020 at 11:11AM

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A big-name shareholder just announced a very big sale of shares.

What happened

It's Thursday, and the Nasdaq is tumbling again, down 1.6% at 10:30 a.m. EDT. Leading the way down is solar stock First Solar (FSLR -0.19%). Shares of the solar panel maker fell 10.6% in early trading in response to an announcement on Wednesday night that a corporate insider is selling off 8.6 million shares at a below-market price: $69, or nearly $2 below yesterday's closing price.

Simple red arrow declining stock chart on a white checked background

Image source: Getty Images.

So what

First Solar announced the secondary offering of stock after the close of trading on Wednesday. The 8.6 million shares, or approximately 8.2% of all shares outstanding, will be sold by billionaire Walmart heir Lukas T. Walton. First Solar only clarified the $69 sale price early Thursday morning.  

Why would investors (other than Walton himself) care about this sale? For one thing, there's the selling pressure to consider: When 8.6 million shares flood onto the market at $69 each, it's unlikely First Solar's remaining shares will sell for much more than that.

The size of this sale may also suggest a lack of confidence in First Solar by one of its largest (and presumably best-informed) shareholders. Adding to this worry, Walton said last night that he plans over time to donate another 8.6 million First Solar shares "to various charitable organizations focused on urgent issues facing society and the environment, including relief efforts related to the COVID-19 pandemic."

Now what

So Walton has announced plans to divest himself of some 16.5% of all First Solar shares. Whatever his specific reasons for doing so, they probably don't include a conviction that these shares are going up.

That being said, even after all these divestments have been accomplished, Walton will still own 4.9% of First Solar's outstanding shares, so he's not abandoning the stock completely. Whatever his reasons for that, they don't clearly indicate he's lost faith entirely.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends First Solar. The Motley Fool has a disclosure policy.

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