Why Sun Stopped Shining on First Solar Today?
Sep 17, 2020 by InvestorDestination Team
Shares of First Solar (NASDAQ: FSLR) plunged today after the company announced a secondary offering of its common stock. Walmart heir, Lukas T. Walton, will sell all of the shares issued in this offering. The company will not receive any proceeds from the sale of the shares. Mr. Walton's father, John T. Walton, was an early backer and investor in First Solar.
Mr.Walton is one of the largest shareholders and currently owns around 21.8% of the company. He is selling 8,649,074 shares or approximately 8.2% of First Solar's outstanding common stock. The investment bank handling this transaction has priced the shares at 69/share, which is slightly below the previous day closing price. While issuing secondary offering, pricing slightly below the market price is standard practice.
Apart from selling 8.6M shares, he plans to donate 8.6M more shares over time to various charitable organizations. He is planning to reduce his holding from 21.8% to 4.9%. Investors are wondering whether this largest shareholder is not expecting sunny days ahead for First Solar.
One of its largest shareholders is drastically reducing his stake in the company is not an indication of the company being undervalued. However, he is not exiting his entire stake. Apart from that, the company is not issuing shares due to liquidity challenges. It has the best balance sheet in the industry.
The company has competitive products. Even during this challenging environment, demand for its series 6 panels is strong. However, due to increased competition, the solar industry is moving away from vertical integration. First Solar is also following in that footsteps. It is shredding businesses and focusing on its module business. In the near-term, it possesses a modest potential to generate cash and growth.
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