LDK Solar: Material Discrepancies in Analyst Coverage/Media Reporting

Last Friday, the LDK Investor Group held its third interview with LDK Solar's (LDK) Chief Financial Officer, Executive Vice President and Secretary, Jack Lai. We had sent him a large number of questions, covering everything from order book, financials and plans for the poly plant. (These questions had been contributed by many of the group’s members.) We were restricted to 30 minutes at this time, and therefore followed up with a second interview on Monday.

In light of the recent analyst reports and the article from Barron's, we decided to focus on the three main issues as outlined below.

1) Inventory

In Q4, the inventory has risen far faster than revenues. The implication from Barron's is that this rise is evidence that LDK is stockpiling or sitting on unusable inventory. We wanted to ascertain if this is the case and establish why the rise in inventory has happened. During the conference call, some analysts said they could not reconcile the value attributed to the Inventory with the quantity in stock and we also addressed this issue.

2) PolySilicon Plant Progress and Supply of Poly Feedstock

Another major issue raised by the analysts is that if the larger polysilicon manufacturing facility is delayed then LDK will suffer severe poly shortages in 2009. This would result in the company being unable to fulfill their contractual obligations and/or reducing the margins substantially.

We focused on the implications of this event occurring and questioned Mr. Lai on the backup plan in the event of a delay.

3) Financing

The last issue raised and addressed was the ability of LDK to finance their new plant and maintain cash flow throughout the year.

On the whole, we find that LDK tries hard to answer all questions and concerns within the confines of competitive information and public disclosure. They need to intensify this effort with the people who really matter – analysts and money managers – to overcome what at present appear to be double standards; for example:

1) Rising inventory is seen as a major issue by Lazard while at the same time they are criticized by Piper Jaffray because secured poly supply (ie inventory) is not sufficient to meet 2008 needs.

2) Analysts are concerned about margins falling despite the fact that LDK already have the highest margins in the multicrystalline industry and are projecting further a increase to 42% to 50% gross margin for 2009, up from 30% in their most recent results.

3) Piper Jaffray is willing to value First Solar (FSLR) at a lofty 40 times 2010’s earnings, yet LDK is only valued at 14 times this year's projected earnings, despite similar earnings growth prospects over the same time frame.

4) Analysts have sometimes downgraded the stock while simultaneously raising their expectations. One would expect that higher expectations would reflect a higher share price so it is hard to reconcile these positions.

These confusing messages are likely the result of LDK providing insufficient information to the analysts covering the company. As LDK continues to execute on its business plan, they will need to focus more efforts on addressing such concerns.

To participate in the Investor Group, you can join the group on Facebook, or send an email to either Hakan Telenius (htelenius[at]shaw.ca) or Conor Shaw (conorshaw1[at]gmail.com).

1. Inventory­­

What are the inventory components?

Having received several requests for additional information, the company is putting together a more detailed schedule of the inventory components and will include this within the presentation for the Morgan Stanley conference. The presentation will be published on their website.

In the meantime they have roughly broken down the inventory for us as follows:

• 1,600 tons are presently “in possession”; of which
  • 856 tons is raw poly in the warehouse
  • 752 tons are in transit (mostly recyclables; valued at $121m. This is the component that some analysts were missing when they attempted to reconcile the inventory value with the amt of raw poly in the warehouse.)

Mr. Lai explained that most of the increase from Q3 to Q4 is inventory that has been recently purchased and is actually still in transit.

It is coming in from suppliers all over the world and so takes time to arrive.

The remaining inventory ($350m less $121m) is made up from the raw poly in the warehouse; work in progress, finished goods, and other inventory required to produce their end product such as Crucibles, Wiresaws, Slurry etc.

All of this polysilicon will be used up during 2008, as described later.

On the $29m non-current inventory, Mr. Lai explained that this product will all be put into use in 2009; once the larger poly plant is completed for 2009 the product can be mixed with their virgin stock. This inventory [~150 tons] composes only 1.5% of the poly requirements for 2009. Importantly, because the inventory will be used, it should not be written off.

We asked Mr. Lai if the auditors [KPMG] are in agreement with the way the company is accounting for inventory and the numbers given. He confirmed absolutely that this is the case.

It is a fact that LDK relies heavily on sourcing feedstock from recyclables for feeding its growth and keeping costs down. This is a strength, not a weakness, of the company’s strategy, a fact that somehow has been lost in the present debate. However, with the company’s auditors onside [and the major review led by an external team that took place last year, exonerating the company], we believe that the audited financial statements in the upcoming annual report will be without concerns from the auditors on this issue.

Is inventory growth too large?

The inventory rose from $225m in Q3 to $380m in Q4 - faster than revenues have risen. The unstated allegation was the growth proves that the company is sitting on unusable feedstock. This issue was possibly the biggest red herring following the earnings release, and should have been put to rest right away.

The company requires 4,400 tons of feedstock to manufacture its pre-sold production for 2008. We know that LDK did not [and still does not] have the full feedstock requirement fully secured at this point. It is therefore absolutely critical that they acquire material when they can – anything less would be highly damaging to the company’s prospects.

Mr. Lai provided the following overview of the present feedstock situation for 2008:

• 1,600 tons of poly are either in the warehouse, or in transit to LDK [see above]
• An additional 1,600 tons are already secured from suppliers to be delivered during rest of year

The above total 3,200 tons, or 73% of total needs for 2008

• Add some internal production projected: 350 tons; makes 81% of the 4,400 tons required
• Thus, the remaining to be secured is at least 850 tons (19%). We gather that the following amounts are under negotiation on price, and are expected to fill the remaining gap.
  • 600 tons virgin
  • 800 tons recyclable

Put simply, the inventory is rising because they have been aggressively buying more in Q4.

Mr. Lai said that, in an environment of increasing feedstock prices, they needed to secure poly as early as possible.

If we don’t commit to the prices now, it is very likely that later in 2008 we will need to pay more, and that’s if we can buy at all.

Finally, it should be noted that the vast majority of the increase from Q3 to Q4 ($121m) was not in feedstock sitting at the warehouse, but rather in the amount of newly purchased and incoming material, still in transit.

2. Poly Plant Update

Mr. Lai confirmed that the construction of the 15,000 ton polysilicon plant remains on schedule (which includes the production of TCS) and that it is due for mechanical completion at the end of 2008; at that time with an annual production capacity of 6,000 tons. In addition to providing updates on the website, they will update shareholders regularly (certainly every quarter), and we were invited to check in with them as needed, including visiting the site.

"Mechanical completion at year end": this means that the plan calls for all equipment and machinery including TCS production and recycling systems to be installed and ‘ready to go’ by the end of the year.

Given that the TCS production and recycling element of the plant is the most complex and most likely to experience a delay we questioned Mr. Lai on the impact of this happening and asked if a fully operational system was priced into their guidance range for the year. He confirmed that the 42% to 50% margin guidance assumes in house TCS production. However, should they experience a delay in this area they will initially buy in the gas. (They already have an agreement with a local company to supply gas for the smaller 1000 ton poly factory, which should be in production late 2008).

The company has been guiding for a production of 5,000 - 7,000 tons of polysilicon in 2009. This represents an extremely fast ramp-up to production; however Mr. Lai has strong confidence that this can be achieved and pointed to DC Chemical and MC Tech of Japan who, he says, have both ramped up in less time than the LDK plan calls for.

Over the coming weeks, we will continue to explore how [why] the company believes that it can achieve this level of production in 2009. However, LDK is putting in extraordinary efforts on the project; and is working with credible companies. In our view, it would be premature to conclude that the company cannot produce anything in 2009, given the importance placed on this expansion, as well as the company’s records to date. Further, customers such as Q-cells and Hyundai, who are literally banking on LDK’s ability to deliver in 2009, have done their own due diligence and come away with a favorable impression:

"Having visited LDK Solar's polysilicon plant in Xinyu City, China several times, we are confident that both their wafers and new manufacturing facilities will meet the highest industry standards," commented Kwon-Tae Kim, Hyundai Heavy Industries Executive Vice President.

“LDK has been a highly reliable partner and we are pleased to deepen our business relationship with the company,” stated Anton Milner, CEO of Q-Cells AG.“This 10-year contract with LDK ensures that we will continue to receive their high-quality multicrystalline wafers in support of our growth plans.”

3. More on Poly Supply for 2009

In 2009, wafer shipments are expected to double from 2008 to around 1.1GW. An estimated 9,000 tons of poly will be required during the year; that is, 2,000 – 4,000 tons more than they have guided to produce in-house. Further, several analysts currently predict that the in-house production will be considerably lower than guided; that LDK will be unable to secure the required poly for the year and actual results could be as low as half of guidance. We spent time on this topic, and will continue the discussion, to understand the company’s options and the impact of various scenarios.

Mr. Lai said that during 2009, approximately 2,000 – 3,000 tons of polysilicon will be coming from LDK customers who themselves have access to poly – this covers about 30% of the production needs. We think there should be a reasonably high likelihood of this material be forthcoming (customers tend to have long-term contracts; and are essentially the same as in 2008). Further, this source of polysilicon has, at least in some cases, pricing mechanisms such that if the customer-sourced poly price is higher, the wafer price also gets set higher. (This feature was also discussed in the Q4 conf call, explaining why the average selling price was higher than anticipated).

In addition to customer-sourced poly, Mr. Lai said at least 800 tons will be coming from incumbent polysilicon vendors such as Wacker and Chinese suppliers via long term contracts.

Mr. Lai also said that they can keep the recycling factory going at full capacity into 2009, as this is currently producing 2,000 – 3,000 tons per year. This is important as the plan currently calls for the poly plant to replace the recycling factory so they have in effect an in place backup plan which can cover 50% of the factory’s capacity, should it be delayed.

The small 1,000 ton facility has the higher likelihood of reaching its production goal: it is at least 6 months ahead of the larger plant, and will not depend on TCS being produced on site.

Combining the above numbers would suggest that against a requirement of 9,000 tons, LDK can obtain between 5,800 and 7,800 tons of feedstock during 2009, should the larger plant completely fail to deliver. Given the margin protection mentioned for some of this supply, and the relatively low cost of poly from long-term contracts and recycling scrap, it would seem likely that this portion [64% - 86% of 2009 needs] is somewhat secure in both supply and pricing.

In addition to the above sources, Mr. Lai said that they expect the significant increase in worldwide poly production coming online in 2009, will make it easier to source poly, and reduce the spot price.

Based on the above summary, in a bear case scenario where the poly plant cannot produce the targeted range, we believe there is a good chance that LDK can still deliver a majority of the 1.6 GW through external sourcing of the missing amount (they have at least one year to find such backup supplies). Thus, the company should be able to substantially increase its profit in 2009, even in the “bear” case scenario. (This is because most of the production is presold, and is essentially twice the 2008 levels). Margins would obviously be impaired, but it is highly likely that the 2009 profit would, nonetheless, well exceed the 2008 estimate of $200m, a year when margins are tight and wafer sales are only half of what they are expected to be in 2009.

In contrast, if the company is able to ramp up production and reach its initial cost target of some $60/kg for poly for the year, we estimate the upside for 2009 to be substantially higher at the top end of guidance, currently 42% to 50%.

4. Capital Needs

LDK has two credit facilities of significance: one $100 million 5-year facility; and a $500 million line of credit. The latter is a 1-year revolving facility (which is why the debt on this line of credit must be put under the "current debt"). Though the line of credit keeps revolving, it is in our view not necessarily the ideal facility to finance a large capital project. In any case, they have drawn about $260 million on that facility, as of December 31. Therefore, basic math tells us that they have at least $300 million still available from the two facilities.

They estimate that they will put to use about $600-800 million in capital during 2008. However, Mr. Lai said that, while cash flow remains “tight”, they are managing for now and that customer prepayments remain their preferred method for financing the capital projects.

He reiterated the following round numbers for 2008:

• They have about $100 million in the bank
• They currently expect about $300, perhaps $400 million in customer prepayments during the first half of 2008. Another $100 million in the second half.
• They project a net profit of $200 million for 2008 (that is $1.786 per ADR, by the way)
• ...and they have about $300 million available in the existing loan facilities.

The above makes a total of at least $1 billion in cash available for 2008 expansion. Whilst this seems likely to be enough for stated 2008 capital needs, it makes for a tight equation and it is clear that the line of credit is less than ideal as the fill-gap solution. Interest expenses already amount to some $1.5 million per month (assuming a 6% rate on $300 million) and – more importantly – the line of credit is on a 12-month revolving basis. LDK needs to have either another [longer term] loan, or issue equity to reduce the reliance on the line of credit. When asked on this, Mr. Lai said that they are considering their options but that the market conditions at present clearly make equity issuance expensive. (A convertible bond may be most appropriate, if they have to raise cash with a depressed share price; our note.)

5. Status of Class-Action Lawsuits

These appear to be following a standard path. We gather that the 8 or 9 separate actions are currently in the process of being consolidated into one suit. This should be completed within a few weeks. Once that has taken place, LDK can be expected to file a motion of dismissal; and a decision on such a motion can take some 5 weeks. Hence, there should be an update on this coming out in around 2 months from now.

6. Investor Relations

Mr. Lai will be meeting with analysts and shareholders over the coming days, which hopefully will enable everyone to get more firsthand answers to questions raised. This is of great importance: the fact is that LDK has an outstanding growth story to tell, and that nobody really doubts that they will be able to increase their profit [over 2007 levels] both in 2008 and in 2009, especially since most of the production is already presold. The debate is how much more profit they will make, but we believe that the company guidance should be a strong indicator of where they will end up, at least for 2008. Thus, a net result of $200 million (on sales of a billion) for the year represents a 40% increase over 2007 levels. And 2009 should see further increase: even with a much lower-than-guided in-house poly production for that year, their profit increase should be substantial, as noted above.

We believe the real story of LDK is one of growth and upside potential based on smart sourcing of feedstock and rapid expansion. It is a shame that the company finds itself bogged down in defending its business practices, though the ultimate responsibility for improved communications rests with LDK alone.

Disclosure: Author holds a long position in LDK

Comments

[fxtrader07:]

great article! certain analysts and investment houses obviously see little incentive to do an unbiased monitoring of LDK and certain publications, notably barron#s have been ona personal vendetta against ldk for months now - never mind that all their allegations have truned out to be complete nonsense and have been falsified by the company and its auditors. one might expect from a RESPECTABLE, SERIOUS financial publication to set things right at least . but hey, it is just barron's...

2008 Mar 05 04:07 AM

[hellofriend:]

This article addresses some concerns. Now the main issue is if LDK can execute the poly project. Certainly there is a risk that they might not be able to complete the project in time. But until now, LDK has delivered what they promised so far. A better buying point is when the project is finished, even though that means less profit, but with way bigger safety. Always remember, the high return comes with HIGH RISK.

2008 Mar 05 05:25 AM

[kenj100:]

This is an excellent fact finding report. The LDK Investor group has done a great job on this, a job that some LDK analysts should have been doing. We have been getting negative comments from these analysts who really don't know what they are talking about without doing due diligence. We know who they are and their creditability is certain undeserving. Beware of negative analyst comments without backing with facts.

2008 Mar 05 06:48 AM

[Vince Sanchez:]

The article describes all major issues of concerns about the current LDk status of manufacturing & business development and at the same time provides excellent explanations that destroys the Biased allegations from Barrons, PJ and other uninformed analysts.
Congratulations to the LDK investor groups and Hakan & Conor

2008 Mar 05 07:18 AM

[Jason Bui:]

Great job once again. There is still hope for this market. This is more professional than what paid "analysts" have written!

2008 Mar 05 07:38 AM

[stvcomment:]

When Barrons and others raise questions on accounting issues with LDK should they also be in contact with the KPMG Global Code of Conduct they must know that they can confidentially report any hint of shoddy accounting via the KPMG International Hotline.

2008 Mar 05 07:54 AM

[RhodeIslandRed:]

The way Barron's magazine allows Bill Alpert to write articles without any checks is another sign that the good old U. S. of A. is on a secular decline on every front. (For example, after the inventory audit report was released in December, Alpert had the audacity to write that the audit report is a kind of "self-acquittal"! For heaven's sake, if Alpert has solid evidence that the audit conducted by two of the biggest accounting firms in the U.S. is falsified, Alpert should write an investigation report and ask FBI to close the two firms. Alpert will definitely get a Pulitzer prize. But no, he is satisfied to write the accusations again and again in a "small format" and continues to "imply" LDK management is not trustworthy.)

One cannot help but wonders how a "model democracy" and a country proud of her "rule of the law" can continue to function with this kind of brazen manipulations without any checks. The SEC and the FBI simply let the Barron's run free, maybe only because LDK Solar is a "Chinese" company? Or is it jealousy because LDK Solar will become a dominant upstream player in the photo-voltaic industry once the new polysilicon plants are completed? Answers to these conjectures are not important. The attitude and lack of legal actions to curb the bad elements are the most serious and important questions American citizens must ask themselves.

"You say American Government does not follow the rule of the law? No way! I don't believe it" will be the knee-jerk reaction of the majority of Americans, at least for the next few years. Only time will tell whether this chauvinistic ignorance will drive this great country to become a place not really much better off than a country like Argentina or Brazil.

2008 Mar 05 08:01 AM

[PhiSai:]

This is one of the best analyses of LDK solar I have read. It addresses the major issues affecting the stock price, and the company. Unfortunately the two are not always the same. As many have witnessed analyst speculation regarding company statements can severely impact stock price. Conor has shown that careful research and patient pursuit of clarification can yeild better understanding of a company's operations and outlook. Specifically, analyst speculation regarding inventory buildup adversely affected stock price. The reasons for inventory buildup uncovered through research show that the buildup is actually a strength for the company, even a necessity. LDK's actions have shown that it is serious and is aiming to be a major player. LDK's customers prove that someone is listening.

2008 Mar 05 08:18 AM

[Timothy:]

It is a relief to see there are are still researchers who concentrate on the facts - and let the readers make their evaluation on the risk/reward.

2008 Mar 05 08:55 AM

[SolarPro:]

Very good article. Opens up your eyes into the world of WS and their bs! What a joke those analysts are. Makes you wonder what a company with almost exact same revenue (better revenue in 2008) as FSLR is doing at $25/share! Someone has an agenda against this company, but I will not be pointing any fingers! Can you say naked shorts? hmmmmmmmm

2008 Mar 05 09:00 AM

[MS:]

I have followed the fate of this company for some time and it is truly difficult to evaluate the information flow and its validity. I do not have a position in the stock but I greatly appreciate the time and effort spent on writing this article. It helps me better understand the issues regarding LDK. Thank you!

2008 Mar 05 09:12 AM

[tessant:]

finally a well written piece about LDK. About time, SA.

All you solar headies out there - come check out my site - its heavily weighted in solar and alt energy talk and reports...

Scott
growthportfolio
"the facebook of investing"

2008 Mar 05 09:59 AM

[canb888:]

Thanks Conor. What a great report. Some analysts and Barron's seem to align themselves with a disgruntled ex-employee by the name of Situ even after professional independent audit/legal firms found out that his allegations were false. LDK delivered and exceeded consensus estimates and their own guidance and yet Barron's repeated negative comments and a few analysts lowered target price in concert. Sound irrational. One thing seems to be certain, i.e., LDK's management is focused on growing the company profitably regardless of what the analysts say and that's what small investors like us are looking for in a great growth company that is making great contribution to curb global warming. This report gives us more confidence in the LDK management team. Looks like the sun is rising and LDK will shine.

2008 Mar 05 10:19 AM

[buddalovesrubs:]

Many thanks to Conor Shaw, LDK Investors Group & the LDK Yahoo Message Board. This analysis is very detailed and answers many questions. I first heard about LDK back in October when the first allegations of fraud were insinuated. After learning more about the company, its business model, its leader Xiaofeng Peng and the drive behind this company it became clear to me that LDK is a winner.

Successful emerging growth markets come up with new competitive strategies that beats their competitors and provides that necessary rootstock for strong growth.

LDK, recycle wafer program led by visionary Light is doing just that. Its ahead of their time and the drive-by media types and analytical thinking still inside the box doesn't recognize this.

2008 Mar 05 10:20 AM

[paul b:]

Another great article by the LDK Investors Group. Puts some of the superficial innuendo-based competition to shame.

RhodeIslandRed, I agree wholeheartedly with your comments. But it's not just LDK, or Chinese companies that the SEC allows to be abused by the likes of Barrons. This crap goes on all the time. Think of it - there wasn't enough corruption in the market, the hedge funds didn't have enough advantage, so the SEC felt it wise to kill the uptick rule for shorting. Sad to say the markets are corrupt to the core, beginning with our government's refusal to create a fair and level playing field, and are stacked against the little guy. May God have mercy on this nation.

p.

2008 Mar 05 10:46 AM

[alpha24seven:]

Excellent job. This is the best I've seen yet.

Two things.

1) This really points out that the financing for the new plant is key. In fact it seems to be a fragile puzzle with a large percentage being either a revolving credit facility or a new dilutive round of some type. Neither is easy nor are they cheap in this environment. What is the debt servicing on a $300mm revolving credit line?

2) This company continues to bring out the conspiracy and anti-American nuts in droves. Never have I seen a company that has so many followers that care little about the actual company but seem to care much more about how the American system screwed this company. I will go on record (I know it sounds conspiratorial) that there is an organized group that simply trys to take the heat of the operational aspects and the executives of this company. They are organized and I would like to know where they come from and who is paying them. The incredible amount and frequency of these people can not be denied. At one point in 2007 I counted at least 50 individual people carrying on the "anti-American" and "LDK is being shafted by Wall St." banner. There is no coincidence here. It is for real.

2008 Mar 05 01:37 PM

[RhodeIslandRed:]

Alpha24seven: Who do you think you are? You are responsible in sending out unfounded lies all over Yahoo LDK's bulletin board about the severe damages of 15,000 ton raw silicon materials yesterday by using deliberately cooked up random translations to confuse people. Here are your posts:

-- Apparently an article an article published in the Jiangxi Daily on February 25, the "snow disasters" damaged a material sum of "15,000 tons silicon material." In addition, LDK suffered "some machinery and equipment damage."


messages.finance.yahoo...

============Alpha's posts below=================...

Articel (sic) In Jiangxi Daily -- Damages from storm to equipment & Si inventory.
No word on ANY of this from the company. Trying to track down exact article piece and have it translated myself.

Not good...

It was here and I can't get to it anymore. Write the editor and ask for it. This is what it said:

February 25, Xinyu economic development machines roar. Due to snow and ice damage in the disaster caused by fire lines Concord Merlot food factory, Employees are cleaning up debris, electricity workers are hurrying to the installation of a new transformer. The snow disasters Xinyu City 258 enterprises disaster, the collapse area of 179,000 square meters plant, machinery and equipment damage Serious, direct economic losses of 120 million yuan. Xinyu City keep a close eye on industrial production for the first quarter of objectives, and effectively "powerful support, Motoc Oxfam properly, tasks unabated. "To strengthen the city's three technical transformation of the new steel,赛维*****LDK Solar 15,000 tons silicon material,***** Jiang Li Electrolytic nickel, and other key projects, key enterprises, scheduling, on-site production of enterprises in solving the various difficulties and problems. In Steel shortage of coal supply new circumstances, the leadership of the city of Pingxiang mine Jifu help solve the problem of coal supply;赛维 ******LDK plant damaged part of the company, some machinery and equipment damage,****** the city has set up a coordination group to be stationed in enterprise-site office To solve the raw materials, power supply, and many other acute and difficult problems. The work, providing strong security to ensure that the city
Key enterprises demand.

----

Has the company EVER mentioned 15,000 tons of silicon material damaged by the storm? I don't think so and one of you Sherlock Holmes longs needs to get on investigating this further.

======================... alpha's posts ================

You should know it is illegal and wrong to spread the lies. I translated the whole news report in order to prove you are completely wrong. LDK does not even have 15,000 ton raw silicon on their site, how can this be true to begin with?

The original Chinese report and its accurate translation can be found here:

messages.finance.yahoo...


Actually I don't want argue with a brazen liar like you at all. I am exposing what you have done to let people make their own judgment. Anyone who has any sense of right or wrong will simply skip whatever you write and move on. You are not worth even a single second of any decent people's time.

2008 Mar 05 02:04 PM

[TommyC:]

Excellent job Conor. I think this is really the future of stock analysis... groups of dedicated investors and the company executives that are willing to speak with them as equals.

At the very least, this shows that when the paid analysts don't do their job, someone else will.

2008 Mar 05 04:48 PM

[wildeagain:]

There are other professional analysts that are writing about the personal vendetta at Piper Jaffrey against LDK. As a stockholder, I am very thankful that I can Google such a thorough report as this. It's a shame that it's possible that so called pro analysts (like Piper and Barron's) have an agenda. I could not have imagined it possible, but when Piper went completely in an opposite direction compared to other analysts last year thus depressing the stock at 30, I had to wonder. Now it's started again.

I was excited by the excellent quarterly earnings report last week, only to watch the company suffer another 25 percent decline from 34 to 26 in a week. And it reminds me that the long run reveals the long truth.

I can't help but think how when I chose LDK to invest in I noticed so many of the same numbers at FSLR, except the ridiculously high p/e of FSLR in comparison to LDK. That's why I believed in LDK. They continue to be a leader and will be ahead of the competition because of their own plants for production. Maybe the incompetents at Piper and Barron's will get fired soon for their irresponsible actions. That's my hope.

HEY, CEO's at Barron's and Piper, FIRE them for their personal vendettas. Then LDK's stock price would be free to roam where it should be based on the merits, instead of the rhetoric.

2008 Mar 05 06:16 PM

[thedivot:]

Check out the SeekingAlpha articles under LDK from Jan 22 & 23 - Conversations with Jesse Pichel. He has been one of the main 'negative' analysts against LDK - as much as I see a bright future for LDK, these articles make some interesting points and Pichel comes across as a serious, competent analyst - not some flake. I think alot of the problems come from lack of clear communication from LDK which leaves interpretation up to everyone.

2008 Mar 05 06:21 PM

[wildeagain:]

Pichel has staked his reputation on his opinion. He was the one who got sandbagged by Situ in the first place. He believed the disgruntled fired employee and it backfired when the independent audit proved Pichel and Situ wrong.

Now here we are again with LDK having to defend itself from Pichel one more time. Pichel has no choice but to keep attacking from his initial position. To do otherwise would reveal himself as incompetent. Wrong once he has to keep coming back for more attacks on LDK. His false pride demands it. His reputation is staked on it. No choice for Jaffrey now, but to keep taking the low road.

2008 Mar 05 06:51 PM

[eurodollarguy:]

That goes to show the stark lack of knowledge and the consequent spreading of lies of people with their own agenda such as alpert, ascensio and the two geniuses at gs pj.
As a result we have two companies with similar sales, profits and growth rates going ino opposite directions:
FSLR at 210 with a market cap of 17B and LDK at 25 with a market cap of 2.7B

2008 Mar 05 07:20 PM

[johnboy:]

I remember when Amazon.com was a new company and Barron's did a front page headline "Amazon.Bomb" and how they weren't going to make it. Now look at Amazon. Barron's should be Barron's.bomb. Don't give'em the time of day.

2008 Mar 05 08:21 PM

[gmchiu:]

I HATE TO SAY BARRON'S, WHAT'S IT ? YOU STILL TRUST THIS KIND OF NEWSPAPPER , THEY EVEN DONT KNOW WHERE IS CHINA , ALL THEY DID EVERYDAY JUST FOUND ANY REASONS AGAINST IT , LOOKING FOR THE OTHER STOCKS .. LIKE FSLR.... IT WILL KEEP GOING KEEP GOING , WILL HIT 10K NEXT YEAR ( THOSE ANALYSTS ALWAYS AGAINST LDK WILL TELL YOU SOON ) WHEN THEY TELL YOU SELL IT YOU NEED TO BUY IT, WHEN THEY KEEP TELLING YOU BUY IT THEN YOU SELL IT, OTHERWISE THEY WILL MAKE A LOT OF MONEY THEN YOU. IT'S THE WAY THEY MAKE MILLIONS DALLARS PER YEAR .

2008 Mar 05 08:42 PM

[Jack S.:]

Let's boycot WS and Barron's B.S. all together. Perhaps then, they will realize how much business they will lose in the long run.

2008 Mar 05 09:04 PM

[Jack S.:]

Guesss what, alpha24seven is the one screwing people with margin accounts. He forced you to sell at dirty cheap price. He will be facing the SEC's inquires soon. Good thing that everything is digital and goes on his record.

2008 Mar 05 09:35 PM

[girl money:]

WOW! What a thorough, well written, fair and balanced snap shot in to LDK's situation. For the first time since this all started last year, I finally feel as though I understand the whole thing. I wish there were more people like you out there covering these types of market issues.

2008 Mar 06 12:10 PM

[Jack S.:]

www.youtube.com/watch?...

A close look at their factory and equipment on youtube.com.

2008 Mar 06 02:47 PM

[solar fan:]

Well written indeed, but for someone who has done business in China you wonder a bit when someone tells you they all of a sudden have $120 million of silicon on trucks all around the world heading for their plant. And why aren't payables up? They have prepaid for all of this and can't get terms on anything?

2008 Mar 07 03:03 PM

[asd:]

The truth abouth the lying scumbags in LDK:

www.pv-tech.org/editor...

I'm very amazed this company can still be traded on an american stock exchange.

2008 Mar 07 08:25 PM

[PhiSai:]

ASD,
Please refer to a dictionary for the definition of 1. Capacity 2. Production 3. Idiot

2008 Mar 09 12:43 AM

[Resol Light:]

asd,

It is a shame to believe a report, by Mark Osborne, you are quoting. A careful read of it will know: 1) The September 2007 report by Osborne is talking about polysilicon CAPACITY (It is not clear how Osborne got the 7000 metric ton polysilicon capacity number. In Aug 20, 2007, LDK expected to "reach a production capacity of up to 6,000 metric tons of polysilicon by the end of 2008" ); 2) In the January report by Osborne, "Production of polysilicon is expected to reach 350 metric tons in 2008". However, LDK stated in Jan 2, 2008, "Polysilicon production: 100 metric tons to 350 metric tons"; 3) In Feb 5, 2008, LDK stated "Silicon production: 100 to 350 metric tons".
So, I dont see any inconsistence from LDK. The inconsistence is created by an idiot like Osborne and believed by an idiot like you. It is waste of time even to read your message, let alone to check everything out.

Conor, it is the best research on LDK that I have known. Thank you so much for sharing your insight! Please keep us posted on your further research.

I do, however, think that LDK has a big communication problem. Results of every conference call, including earning call and analyst call, since last Fall have all being very negative, although I do believe they do not have any accounting issues. They need to be more open, straight forward and well-prepared for various of meetings. To give a few examples:

1) One of the Independent Auditors is widely believed to be Deloitte. However, the company denies to confirm it. That supports the "self-acquitter" accusation. I dont understand why LDK did it this way;
2) The Auditor's report does not EXPLICITLY state that some of its silicon inventory is of low grade but will be used in a gradual manner into the future years and, therefore, should not be written-off. And also, I think Jack Lai did not do a good job in answering the questions regarding 'inventory to be used after one year'. This somehow supports Situ and Barron's accusation.
3) Jack Lai should have anticipated questions regarding their inventory, especially the 'inventory to be used after one year'. LDK paid BIG for inventory accusation! It is unbelievable that Lai came to the earnings CC without being able to clearly address those questions. It is unbelievable that inventory came out to haunt LDK again!

Seriously, I do believe that LDK needs a new CFO, or even co-CEO.

I would appreciate everyone's comments.

2008 Mar 09 01:24 AM

[Doublechin:]

How can he work in the best interests of LDK if he is shorting LDK
and bragging about it then deletes these posts?

Right now he is deleting users and posts from Yahoo and Google that
are detrimental to himself.

IF THIS GUY CAN DO THIS, WHAT WILL HE SAY TO JESSE PICHEL AND BILL
ALPERT WHEN HE GETS MORE SENSITIVE INFORMATION?




From: Conorsh...@... - view profile
Date: Mon, Apr 7 2008 2:54 pm
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Ha,
you should have a look at the yahoo board. There will be a lot of
women beaten up tonight..... No doubt.

My guess on the premarket pop was that there were loads of idiots on
Yahoo pumping the flyonthewall report about the SEC dropping charges.
I think that was what drove it up so much premarket. No volume so the
retail guys can make a difference then. You could see it happening,
hundreds of them posting it.


I tried to tell them that the news was out months ago and got
lambasted as a short for my trouble.


I was on to hakan and said as much "ie the fools on yahoo pumping
sec,
but i dont think the pros will fall for it, so be careful buying in".


To be fair, i bought premarket too, but dumped it and shorted instead
as soon as i saw all the gains start to give up.


For the record i think we'll keep going down tomorrow. Ill be keeping
all my puts on Yge, and a few of the LDK ones, but i covered the FSLR
short. If it looks like a recovery tomorrow ill get back in long
too...

finance.google.com/gro...

2008 May 28 01:12 PM