This morning, JA Solar (NASDAQ:JASO) announced a $100M share repurchase program that expires on September 12th, 2012. The current market cap as of yesterdays close was $188M. The repurchase program amounts to more than 50% of its current market cap. There is no guarantee the company buys $100M worth of stock or even a significant amount of the intended buyback announced. However, it might be a big enough headline to create a large short squeeze and keep the stock above $1 in the short run to prevent a notice from the NASDAQ about possible delisting.
Solar companies continue to see massive losses as supply continues to outstrip demand. It's hard to be positive on the sector as losses continue to mount and large amounts of capacity need to come offline. JASO has more than $3/share in cash on the balance sheet, or $660M. The company can afford the buyback at the moment, but probably should save the cash for when losses continue to mount.
The majority of the sector trades below cash/cash equivalents on their balance sheet because investors believe the whole sector will continue to lose cash each quarter as prospects continue to look bleak. In a chart below, you will see the majority of the sector trades below cash and can continue to sustain losses for a few more years. These other companies might try and announce buybacks like JASO to prop up their stock in the short run.
|First Solar (NASDAQ:FSLR)||$7.65||1.81x|
|LDK SOlar (NYSE:LDK)||$1.83||1.08x|
|Suntech Power (NYSE:STP)||$2.62||0.65x|
|Trina Solar (NYSE:TSL)||$8.96||0.69x|
|Yingli Green (NYSE:YGE)||$4.37||0.61x|
The bottom line: JASO could experience a short squeeze today and over the next few weeks if the company is willing to stand and buy stock each day in the open market. Shares of JASO will over time continue lower, but there will be significant trading opportunities in the short-run where traders can profit.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in JASO over the next 72 hours.