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Author has a degree in Engineering and is an avid investor in the market. Experience in industrial materials and structures. In college studied atomic & nuclear physics as well as material engineering. Eastern European
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  • History repeats itself on ASYS, crushes earnings and shorts flood in. 2 comments
    Feb 9, 2011 10:41 AM | about stocks: ASYS, LDK, JKS, FSLR, CSIQ, TSL, YGE, SPY, QQQ, TECL, SPXL, TNA, SOXL
    (NASDAQ:ASYS) gapped up at the open to $30.80 and then soon thereafter shorts flooded in to drop it to near $29 thats roughly a -$1.60 gain by shorts in a matter of 90 minutes. The only reason this was possible on such a blowout qtr is because of its low float. 

    Exact samething happened last qtr, but within a few days not only did (ASYS) fill the gap up open, it far surpassed it as the same shorts headed for cover as more and more investors started buying shares of a company that is growing at a pace that most companies only dream of being able to duplicate.
    Stocks: ASYS, LDK, JKS, FSLR, CSIQ, TSL, YGE, SPY, QQQ, TECL, SPXL, TNA, SOXL
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Comments (2)
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  • Saad123
    , contributor
    Comments (6) | Send Message
     
    I totally agree with you this stock is one of the market leaders and there is no reason big money is bailing out on it. Some of these shorts will be caught with their pants down when it rebound.
    9 Feb 2011, 07:09 PM Reply Like
  • Jeff Andry
    , contributor
    Comments (67) | Send Message
     
    I just submitted an article re: the overreaction by investors due to the shelf. Perhaps shorts are using the shelf to feed off of as well.

     

    I hypothesize a conservative assumption as to the shelf in which I assume (conservatively) that the entire 60M will be in the form of common stock (even though it could end up being a mixed debt/equity offering). I also assume (in my opinion, again conservatively) that the company would issue 3M shares at a PPS of $20.

     

    Assuming a PPS of $25, in order for the equity financing not to be dilutive, the company would have to issue the 3M at $25. That, however, can't be the case since they're only raising 60M.

     

    So if by adding 75M to the market cap we would see what the market cap would be in a non-dilutive scenario, we can then add 60M to the market cap to see what it will be in this hypothetical dilutive scenario.

     

    Non-Dilutive = 235,220,375 (Market Cap at $25/share) + 75M = 310,220,375

     

    Dilutive = 235,220,375 (Market Cap at $25/share) + 60M = 295,220,375

     

    There are two ways to calculate what this would do to the PPS. Also, I'll assume the $29 to be fair, since the market thought that price was fair until we received word of the shelf offering, i.e. that is the last closing price before the announcement of the shelf.

     

    Under method (1), we use an absolute basis of 15M. We would just take the market cap at $29 (which would be 29 x O/S of 9,408,815 = 272,855,635) and subtract an absolute 15M from this figure to arrive at a new market cap of 257,855,635. Then take this figure and divide it by current O/S of 9,408,815 and you get a fair PPS of $27.41. Thus, the market has way overreacted.

     

    Under method (2), we use a percentage basis. The dilutive market cap of 295,220,375 is 95% of the non-dilutive market cap of 310,220,375. Thus to reconcile this against the fair price of $29 before the shelf announcement, we just multiple this figure by .95 and get a fair PPS of $27.55. Thus, the market has way overreacted.

     

    Whichever method you use, you can see the result is about the same.

     

    This methodology obviously is very dependent on the assumption that the company wouldn't issue any new shares under $20. Do you think that is a fair assumption? If the company issues new shares for greater than $20, then this overreaction is even more unreasonable but, remember, I was just trying to be conservative.

     

    I hope this makes sense.

     

    **** I should note that in my article I only used Method 1 above.
    **** Also, I worked out all the math in a way that would easily allow investors to quantify the impact of the shelf if at some future point the company announces how much stock they are selling and at what price. You'd simply just plug that data into the formula in my article, to be expected soon. (It's a premium article, so you can't view it on my instablog, or at all, until publication).
    10 Feb 2011, 06:16 PM Reply Like
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