Was First Solar's Purchase of OptiSolar Shady?

A couple weeks ago we received an email query from an exec at an environmental group wondering about the legality and ethics of solar maker OptiSolar incorporating yet-to-be-approved Bureau of Land Management land applications into its price when solar giant First Solar agreed to acquire the thin-film PV company back in March. I’m not sure how legal it is, I told him, but I would assume First Solar (s FSLR) would do due diligence on how viable the applications are and factor that risk into the price. Well, it looks like the environmentalists aren’t the only ones with concerns: The Los Angeles Times reports that the inspector general’s office of the Department of the Interior is investigating First Solar’s $400 million acquisition of OptiSolar.

Bureau of Land Management official Greg Miller told the LA Times that: “There is no value associated with a mere application, which could be rejected by us for a variety of reasons…A company can buy another company along with its applications, as long as those applications are not listed as assets. That would be wrong…We’re trying to weed out speculators who are filing applications, then waiting for someone to buy them at the highest price.”

Basically the investigations are trying to determine how much of OptiSolar’s $400 million acquisition had to do with the applications. First Solar’s press release from March just cites “strategic land rights of approximately 136,000 acres.” A First Solar spokesperson assures the Times that it was done above board. I’m wondering, regardless of any legal or ethical issues, how much would tentative applications be worth? In the meantime, as Barron’s points out, if the Department of Interior does find anything shady in the deal, it could have a really negative effect First Solar’s stock.