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Summary:

The turmoil on Wall Street has until now had a muted impact on clean technology, but that’s starting to change. Some solar stocks are reeling from the shock waves of Lehman Brother’s bankruptcy. Evergreen Solar (ESLR), JA Solar (JASO) and SunPower (SPWR) took hard hits early […]

The turmoil on Wall Street has until now had a muted impact on clean technology, but that’s starting to change. Some solar stocks are reeling from the shock waves of Lehman Brother’s bankruptcy.

Evergreen Solar (ESLR), JA Solar (JASO) and SunPower (SPWR) took hard hits early Tuesday, falling between 10 percent and 28 percent at the opening. Although each stock has since regained ground — JASO and SPWR were actually back in the green as of midday trading — the three stocks have given up between a tenth and a third of their value this week.

Each company had been in a stock-lending agreement with Lehman, leaving the bankrupt firm with shares that could complicate their future earnings. As Reuters explains,

“Under the deals, the three companies all lent shares to a Lehman subsidiary as part of stock issuances. If Lehman fails to return the shares as laid out under the agreements, they could be counted as part of their outstanding share counts, diluting the earnings per share of the companies.”


Evergreen seems to be taking the hardest hit, despite a statement and a conference call intended to assure investors. Evergreen loaned Lehman 31 million shares for hedging transactions related to $374 million in convertible notes. Those shares aren’t factored into its EPS figure, but investors worry they may be, diluting their stock by an estimated 19 percent. Evergreen said there are provisions to prevent that dilution, but they might cost it $40 million.

JA Solar and SunPower were much less forceful in their assurances. JA officials said they were “unaware of the intentions” of the Lehman unit holding its shares. SunPower said it “cannot provide any assurances” until it studies the matter further. But both vowed to fight for their shareholders.

Although the crisis on Wall Street has been unraveling for months, sectors like solar energy are only now waking up to the possible, and unsettling, ramifications. Over at BusinessGreen, a solar startup CEO ruminated darkly over how the credit crunch could hurt business models like his, which have inherent risk.

“In the short term, it makes credit harder to get – it has an effect on capital, leasing – all the things you would do to get project funding,” he warned, adding that ventures in areas such as photovoltaic solar were still considered to be relatively high risk. “We just came out in June, so we’re really young compared with everyone else, and I’m certain that it will have an impact on raising money.”

The nasty irony of the credit crunch on Wall Street has been that no one has ever been very sure how bad it would be, so they put their money aside to wait things out. But putting money aside made the market less liquid — in other words, it made things worse.

Now the risk is that this destructive dynamic will be exported to other sectors, such as solar. It may not happen, of course. But then again, nobody can be very sure how bad it will be.

  1. that is the problem with going public, there seems to be some prestige around going public, but sometimes it just better to remain a high performing private company.

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  2. @deep patel

    a good point, but i would note that many of these companies went public also to raise money for what can be an expensive business to set up.

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  3. Re:
    “…But putting money aside…”
    Pretty good insight.

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  4. i think everything has been hit. market meltdown is upon us

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  5. [...] by Kevin Kelleher No Comments Posted October 21st, 2008 at 3:32 pm in Big Green,Energy Remember those tens of millions of shares that Lehman Brothers held in solar companies as part of [...]

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  6. [...] Remember those tens of millions of shares that Lehman Brothers held in solar companies as part of convertible bond deals it underwrote? It seems Barclays PLC ended up holding them after it bought Lehman’s broker dealer business following the U.S. investment bank’s bankruptcy. [...]

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