Actionable insights straight to your inbox

Equities logo

Suntech (STP) Drops Despite Solar Industry Gains

Shares in Chinese solar panel manufacturer Suntech Power Holdings (STP) plunged over 9 percent early on Thursday, moving against both the day’s upward trends for solar panel makers and the

Shares in Chinese solar panel manufacturer Suntech Power Holdings (STP) plunged over 9 percent early on Thursday, moving against both the day’s upward trends for solar panel makers and the market as a whole. Joining in the marketwide rally, the Guggenheim Solar Trust ($TAN), an ETF consisting of leading makers of solar panels, gained almost 5 percent as investors appeared to return to more speculative plays with concerns over a potential default easing.

However, investors appeared to turn bearish on the stock after an anonymous source told Reuters that the new investor, Hong Kong-based solar panel maker Shunfeng, would most likely require that shareholders and creditors take a serious hair-cut during Suntech's pending bankruptcy.

Solar Stocks Up, Suntech Down

Other industry leaders all joined the market rally, Thursday, with First Solar (FSLR) up about 1 percent, SunPower Corporation (SPWR) up over 2.5 percent, Trina Solar Limited (TSL) gaining almost 4.75 percent, and ReneSola ($SOL) picking up about 3 percent. However, today it appeared as though persistent questions about Suntech’s bankruptcy had finally begun to catch up to the stock.

Investors Concerned About New Player

Shares in Suntech gapped up just over 10 percent yesterday when the market opened on news that Hong Kong solar company Shunfeng would be making a bid to buy up the company’s stocks, placing an $80 million downpayment on shares in the troubled company’s photovoltaic unit. However, shares plunged as the day wore on, ultimately losing just under 3 percent. The move most likely reflects concerns over how the presence of Shunfeng will affect the company's bankruptcy as excitement over fresh cash gave way to concern over what strings might ultimately be attached. Thursday's decline is most likely connected to a Reuters article which cites an anonymous source as saying that Shunfeng will require its creditors to take a significant loss before the company will invest, further stoking fears that current Suntech investors are likely going to take a hit.

"As for how much of a haircut they will take, it remains a big question mark," said the source. "Another question is whether Shunfeng can put together a financing package for the potential transaction."

Bankruptcy Drama

Suntech announced this March that it was defaulting on a bond payment in excess of $500 million, the first company from mainland China ever to default on its US bonds. The source of the issues can be traced to a June 2008 investment in Global Solar Fund (GSF) , a company building solar plants in Italy and Spain. In order to guarantee a more-than 500 million Euro finance arrangement with GSF, Suntech secured a bond through the Chinese Development Bank using as collateral German bonds that the company later admitted to be forgeries on July 30. Suntech has since been placed into insolvency by Chinese banks and revealed that it has nearly $1.75 billion in debts.

However, despite Suntech’s problems, investors have continued to show some faith. While shares plummeted almost 70 percent over the course of the month of March, they gained back almost all of that value during a 270 percent run from the start of April to the end of July. The announcement about their fraudulent bonds sent the company on another month-long slide, losing close to 30 percent in August, but shares rebounded again, climbing 60 percent since September 1 prior to the end of trading on Wednesday and reaching levels close to where they were pre-insolvency.

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation.