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Naked short sellers may soon face fight from solar companies

Solar and renewable energy stocks have tumbled 70-80% in just few months. It is likely that naked short selling(NSS) is going on among the sector. A daily report from Bloomberg indicates that some stocks are on the fail-to-deliver list for some weeks, this is a clear indication that short sellers can not borrow shares to sell before settlement date. A good example is LDK solar(NYSE:LDK), during the last few months, tens of articles from all kinds of medias covered LDK solar, Suntech power(NYSE:STP) and other names to tell investors that solar energy is going to disappear soon because Europe is cutting subsidies and Solyndra failure is killing the industry. A recent article from greentech media questioned this kind of attacks, the author Eric Wesoff found that not much fundamentals have changed in the last few months except Europe is struggling bailing out Greece. The solar PV demand is actually picking up due to the historical low price of solar products.

We emailed LDK solar regarding this naked short sell issue, reply is a surprise. The company is apparently aware of this issue and looking into this and will take action necessary. Here is what the company had to say:
"Once the third quarter earnings release date has been finalized, the company will issue a press release with further details."

The same naked short selling question to Suntech power also received similar reply. However no reply yet from First solar(NASDAQ:FSLR) when asked about the naked short selling on its shares. We believe that most managements are planning to take necessary actions in front of this kind of illegal shorts. In 2008, When Volkswagen shares got short squeeze as a result of Porsche purchase. The stock popped 286% in one day. The naked short selling played a big role.

Disclosure: I am long FSLR.

Additional disclosure: author own FSLR and put/call options in security mentioned above