LDK Solar: Look Who Survived $36

It always mystifies me when a stock rallies on bad news. But LDK Solar's (LDK) recent saga (or should I call it a morality play) is one for the books.

It appears that $36 has formed some kind of Moses-like barrier in the Red Sea surrounding this stock. $36 has survived every insider-trading alert that former controller Charley Situ emailed to Barrons, WSJ, the SEC and the Wall Street hedge community. $36 has survived four downgrades: two to hold, two to sell. $36 has survived several negative Barrrons and WSJ articles which ran in tandem every couple of days for 4 weeks; $36 has survived lawsuits by umpteen ambulance chasers (lawyers); $36 has survived a massive bear raid by short sellers that's put the stock on the Naked Short threshold list (the 12 day clock is ticking for them); and lastly, $36 has survived the announcement of an SEC inquiry.

Now on the heels of the SEC inquiry plus a downgrade, and throw in the worst day on the DOW in 2 years, LDK is rallying 15% for a couple of days. What gives?

I think I see the truth of the matter now - everything that happened was true (because it happened, yes?) - so sure, I'll give all those negatives the benefit of the doubt (Situ et al), but NONE of them were able to break LDK at $36 - and as soon as the slings and arrows of outrageous fortune stopped slinging, the stock rallied (strongly). Dare we say, "The floor is in"?

In other words, price - as the ultimate arbriter of value (and after LDK traded maybe 150ML shares in October) - is wrapping up its research on the lows. Mr. Market, with his tens of thousands of shareholders, analysts and investors, took a long hard look at it (with only negative comments to go by), and felt that enough was enough at $36. Warren Buffett likes to say, "In the SHORT term, the market's a voting machine. In the LONG term it's a weighing machine".

I'll leave you to decide who's voting and who's weighing now.

Uncertainty has whipsawed this company for a month. But if the uncertainty is lifting, the short interest (which I estimate is almost half the actual available daily float) has only one place to go. Out the door at 45+. When stocks go up on bad news, it's time to take notice. LDK's new owners should be finders-keepers, not losers-weepers.