President Obama visited a company called Orion Energy Systems, which makes energy-efficient lighting and solar power projects, last week and also touted the company’s innovation and job creation potential in a weekend video address (embedded below). Given such a seeming endorsement by the American leader is a pretty big deal, I spent a bit of time looking into the company’s SEC filings and history this weekend.
While I think more efficient lighting is naturally better than inefficient lighting, I wouldn’t hold up Orion Energy as an example of stellar firm to emulate. The company makes most of its money selling high-intensity fluorescent lighting systems to commercial and industrial companies, and customers include some big names like Coca-Cola (s ko), SYSCO Corp (s syy), and MillerCoors (s sab).
That’s all fine and dandy, but the company, which was founded in 1996, has a history of annual losses, including losing $4.20 million for the most recent fiscal year 2010, and before that, $1.57 million in 2006 and $1.27 million in 2005. It generated its first profitable year in 2003, seven years after it was founded. The company had a three-year streak of modest earnings, generating $511,000 of net income in 2009, $4.41 million in 2008 (solid year) and $929,000 in 2007 — not exactly stellar.
More recently in 2010, the company decided to add in offering solar PV and even wind power products to its customers, and is still in the early testing stage of this strategy. It’s by no means a long-standing renewable energy company as described in Obama’s address. And as the company notes in its annual report, renewable energy project development is a risky and competitive business to jump into. It’s usually not a good sign when companies start moving away from their core competencies.
Back when the company held an IPO in December 2007, the company priced in the mid-tier at $13 per share, and earned net proceeds of approximately $78.6 million. But since then, the company’s stock has dropped considerably to around $4.20 today. The company’s stock crashed in early 2008, several weeks after its IPO, and the company was hit with a class action lawsuit from a group of shareholders stating:
On February 6, 2008, just weeks after its IPO, Orion revealed news concerning the Company which completely surprised analysts and investors, and caused the stock to drop approximately 43%, to a price of $8.51 per share. . . . Orion revealed that revenues in its current fiscal quarter would decline as the Company took aggressive measures to promote a “new business model,” a change in focus that is alleged not to have been adequately disclosed or described in the IPO Prospectus.
Orion says it reached a preliminary agreement to settle the class action suit in the fourth quarter of 2010.
I’m a strong supporter of energy efficiency and clean power, but there’s a danger in connecting companies with political aims — particularly if they aren’t that strong a company. I’m also a strong supporter of the Department of Energy and think they have often done a great job. A few times, not so great.
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