GT Solar, GCL Silicon Brave Troubled IPO Waters

It takes some serious nerve to brave the IPO market these days. It takes even more if you’re a solar energy company.

But whether it’s pure craziness or contrarian cunning, two candidates are continuing to do just that. Merrimack, N.H.-based GT Solar is pushing ahead with plans to sell $530 million in shares on Nasdaq this month. And today, China’s GCL Silicon filed for an even more ambitious offering: $863 million worth of shares to be traded on the NYSE.

Solar energy has a promising future before it, and yet 2008 has not been kind to solar stocks. The WilderHill Clean Energy Index is down more than 30 percent this year. The performance of solar companies that have gone public is mixed.

Shares of First Solar (FSLR) are trading 13 times the company’s $20 offering price. But JA Solar (JASO) and Solarfun (SOLF) shares have tumbled back to within a couple of dollars of their offering prices. Real Goods Solar (RSOL), which installs and maintains solar systems in homes, went public at $10 in May and its stock is already down 40 percent.

What makes these newcomers look so special? GCL Silicon, which supplies wafers to the solar industry, has a short history but is growing fast. Revenue in the first quarter was $81.5 million, twice the $40.8 million revenue for all of 2007 (during which it began recording sales). First-quarter profit was $34.7 million, compared to a loss of $2.9 million for 2007.

That’s a net profit margin of 42.5 percent. Granted, it’s a very short operating history to gauge future trends on, but still an impressive start.

GT Solar’s appeal seems to be its position further up the solar industry food chain. It makes the equipment used to create polysilicon for solar modules. A shortage of polysilicon has been a lingering problem for solar panel makers, so GT’s equipment is likely to see strong demand.

GT is also seeing fast growth. Revenue increased fourfold to $244 million in the year through March 31; the company also swung to a net profit during that period of $36 million vs. a $18 million loss the year before.

Of course, adding new shares to a sector that’s already in a slump carries its own risks. If the factors weighing down solar stocks aren’t resolved, GT and GCL may not fare so well. But both companies have enough going for them to win entry into the public markets.