Shares in solar company Yingli Green Energy (YGE) traded down sharply on Friday after the company priced a public offering below its current market value. Yingli is offering some 25 million American Depository Receipts (ADRs), which are redeemable for one share of common stock, at a price of $3.50 apiece, with an additional 3.57 million reserved to cover any overlays.
The price of these ADRs was significantly below the current market price for Yingli shares as of market close on Thursday, when they were trading hands for $4.22 apiece at that point.
As such, the market correction appears largely in line with the pricing by Yingli. Shares gaped down 12.8 percent to $3.68 at the opening bell and continued to lose ground to a low of $3.53 just before 11 am ET. Shares bounced back some, but losses hovered around 15 percent with shares trading at close to $3.60 apiece into the early afternoon.
The public offering is expected to raise $83 million, $55 million of which is expected to be invested in solar farms in China. Plummeting prices for solar panels has led the company, the world’s leading manufacturer of photovoltaic (PV) panels by volume, to investigate ways to expand its operations into different areas.
While trends in the solar industry would appear to be shifting towards rooftop solar panels and distributed generation, but the upside for solar companies’ balance sheets in engaging in large scale projects like these solar farms is fairly clear, especially as low prices for solar panels continue to hurt margins. Shifting to downstream business offers small-cap manufacturer Yingli an opportunity to engage in higher margin areas of business including construction, design, and procurement.
Yingli currently has 1 gigawatt of solar capacity under development in China with an additional 200 megawatts internationally. Yingli has been an active participant in the renaissance for solar companies over the last 18 months, with consistently growing revenues and profits.
The industry as a whole saw significant losses on Friday, with the Guggenheim Solar ETF (TAN) shedding almost 3 percent and several major players losing value. Trina Solar Limited (TSL) was off more than 5.75 percent, JA Solar Holdings (JASO) lost just under 6 percent, and ReneSola (SOL) was down just under 6.75 percent.
Certainly, given the way the solar industry tends to trade in unison, it would be tempting to attribute the broader industry losses to Yingli leading the way down. However, broader losses for tech and growth stocks, with the Nasdaq Comp. index down over 1.5 percent by 2 pm ET, may also be a bigger driving factor behind the sell-off in solar stocks.
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