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    • ON: Mon Sep 22nd 09:34 AM
      Commented on:
      LDK Wants $200M More for Manufacturing
      Here is the full article for all to compare:
      LDK Solar pulls off $200 million follow-on
      By Anette Jönsson | 22 September 2008

      The deal is launched before the opening of US trading on Friday and prices at a 4.55% discount to the previous day's close.

      In a surprising move, coming right at the end of one of the most volatile and hectic weeks in recent Wall Street history, LDK Solar succeeded in raising $200.4 million through a follow-on offering. The Chinese solar wafer manufacturer grabbed a window that opened up after its share price rebounded 16% from Monday’s low amid a recovery in the broader market sentiment and the gamble paid off. Demand was even strong enough to allow the deal to be upsized by 26%.

      The company initially offered 3.8 million American depositary shares at a 2% to 7% discount to Thursday’s close of $43.74. It ended up selling 4.8 million ADS – all backed by primary common shares – at a price of $41.75, or a 4.55% discount. At the final size, the offering accounted for about 4.5% of the existing share capital.

      The deal was launched an hour before the US market opened on Friday and was covered in 20 minutes. However, the lead managers weren’t able to close the books until about 30 minutes into the trading session as they had to wait for the necessary regulatory approvals to come through, which meant the price had to be fixed while the stock was moving. But investors stuck with the deal and surprisingly didn’t show much price sensitivity. A source said the price could have been fixed at the top, although that might have been a bit too provocative in light of the panic sell-off in US markets earlier in the week.

      The order book was said to have included about 40 accounts and comprised existing investors as well as solar power specialists and those who were chasing liquidity. Given the timing of the deal (kick-off was at 8.30pm Hong Kong time), the buyers were predominantly US-based, but with some interest from Europe and Asia.

      LDK’s share price fell 5.3% to $41.44 in Friday’s trading and while this meant it closed below the placement price, the share price did recover from an intraday low of $39.15, suggesting that investors were still prepared to support the stock. The fact that the company was raising money primarily to fund capacity expansion likely worked in its favour here. LDK did underperform the market though, with most other solar power plays gaining ground and the Dow Jones index rallying 3.4%, following a 3.9% gain on Thursday.

      The initial fall in the company’s share price may have been a reaction to the unusual way in which the shares were sold. US follow-ons are typically marketed during at least one, and often several, trading sessions against a moving share price. Investors may also have been surprised by the fact that the deal was launched on a Friday. According to the source, this is the first SEC-registered block trade to be done on a Friday morning ever.

      This unusual approach brings further evidence that a bit of innovation, and indeed a lot of flexibility, may be needed to get deals out the door in the current environment which continues to be marked by violent day-to-day swings in global stock markets. The acute confidence crisis that had plagued the market for about a week-and-a-half and ultimately forced Lehman Brothers to file for bankruptcy protection, Merrill Lynch to agree to sell itself to Bank of America and insurer AIG to accept a costly government loan facility, appeared to have eased off on Thursday and Friday in response to the US government’s proposed $700 billion rescue package, but there is still no telling how long the current rebound will last. Recently no rally has lasted more than a couple of days, adding to the urgency to grab the window when it appears.

      LDK mandated Goldman Sachs, J.P.Morgan and UBS for a capital raising exercise some time ago, and the first few filings on Friday morning suggested that the three banks would all be involved in the deal. However, when it was launched, J.P.Morgan was no longer on the ticket. No explanation was given, but it is possible that the bank didn’t feel comfortable to support a deal at such short notice. Goldman and UBS acted as joint bookrunners.

      LDK said it would use 60% of the proceeds towards the ongoing construction of a polysilicon manufacturing plant, which was begun in August 2007 and marks its first move upstream in the value chain. Polysilicon, which is used as a raw material in solar wafers, has been in short supply for the past couple of years and by starting to produce its own, LDK will go some way towards securing its future needs. It expects to have an aggregate installed annual production capacity of approximately 7,000 tonnes of polysilicon by the end of 2008 – allowing it to produce 100 to 350 tonnes of polysilicon this year, and 16,000 tonnes by the end of 2009. Aside from these efforts to produce its own raw material, LDK believes it has enough inventory and commitments from suppliers to satisfy substantially all of its estimated requirements through 2008.

      Another 30% of the proceeds will go towards the expansion of its production capacity of multicrystalline wafers from 880MW as of June 30 to 1,100MW by the end of this year and approximately 2,000MW by the end of 2009. It will also begin commercial production of monocrystalline wafers in the fourth quarter this year and expect to reach an annual capacity of 200MW by the end of 2009. Monocrystalline wafers have a higher efficiency than their multicrystalline equivalents, but cost more to produce.

      LDK has experienced strong earnings growth since it made its first commercial wafer sale in April 2006 and in the six months to June, its bottom line improved by 274% year-on-year to $199.4 million. The share price remains volatile though and, while it has recovered from a 2008 low just below $20 in March, it is still down 40% from a year ago. The 16% bounce on Tuesday through Thursday last week came on the back of a 7.5% drop on Monday.

      The successful outcome of this deal may improve the chances for solar cell manufacturer Gintech Energy Corp to complete its planned sale of about $150 million worth of global depositary receipts. The Taiwan-listed company set off on a nine-day roadshow on Wednesday last week and if the response is positive, it will conduct a one-day bookbuilding at the end of it. ABN AMRO and UBS are the joint bookrunners.


      Copyright FinanceAsia.com Ltd., a subsidiary of Haymarket Media Ltd

      It's like night and day, completely different.
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    • ON: Mon Sep 22nd 09:07 AM
      Commented on:
      LDK Wants $200M More for Manufacturing
      Jennifer, ypou don't seem to be as excited as the New York Times who called this secondary offering a mini-coup: "LDK Solar, a Chinese solar wafer manufacturer, pulled off a mini-coup Friday by succeeding in raising $200.4 million through a follow-on offering that came at the end of one of the most volatile weeks in Wall Street history." Comparing what you wrote with that article in NYT and FinanceAsia, makes you look unfortunately petty. Think big if you want to be successful.

      View article »
    • ON: Mon Sep 15th 14:04 PM
      Commented on:
      As Timminco Shares Go Up, LDK Deal Raises Questions
      I am so disappointed with Greentechmedia for:
      1. Making a very positive news for LDK look like it is negative, look at the tilte of this article - need I say more?
      2. Not having the facts straight, i.e., that this is related to a previously announced 5GW deal. No, the previous 6GW deal stands and there is a NEW MOU for a 5GW deal attached to this new contract.
      View article »
    • ON: Fri Sep 12th 11:52 AM
      Commented on:
      Shanghai Should Continue to Sell Off
      Addendum: I do agree with the article that the banking system is a huge liability in China and I have had this view for a long time now. However, the main engine of growth is not the stock market but the real economy which has many problems but, IMHO, is not as bad as the stock index would seem to indicate as explained in my previous comment. GLTA again.
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    • ON: Fri Sep 12th 11:46 AM
      Commented on:
      Shanghai Should Continue to Sell Off
      Let me be a bit extreme to make my point:
      1. How many Chinese companies with more than 500 employees are listed in China? My guess: no more than 2%. If anyone has a better guess or study, please post.
      2. If the Shanghai stock market drops to zero, what would be the impact on people's livelihood, the economy and the government? My guess again, not much since the stock market, as many people pointed out, does not act as a major wealth/resource allocator yet. It is more like a casino and people go to Las Vegas to lose money without much impact on the US economy.
      My conclusion: the Chinese stock market does not have the same impact on the Chinese economy as the NYSE has on the US economy. There is no reason to link the index directly to the performance of the real economy. Therefore, there is no need to worry too much about the index itself. Besides, the index is not a very good indicator of the economy at all due to the make up of its components which I do not want to elaborate here due to space/time limit. GLTA.
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    • ON: Mon Sep 8th 10:45 AM
      Commented on:
      LDK Solar: A New Business Model
      Iam Phree, you should be charging for this research. A five-star article, thanks for sharing..
      View article »
    • ON: Mon Sep 1st 22:33 PM
      Commented on:
      Can China Carry the Post-Olympic Torch?
      Eowyn, you try to hijack Seeking Alpha, which is mainly a blog for investment ideas, and make it into a political battlefield. Instead of getting into your trap and debating the politics, I just want to assure you that if we want to discuss political issues, we know where to go. Copy-pasting other people's article which are mostly unrelated to the topic will not help this blog. You would be welcome to try to discuss investment ideas here. Try to write something more of your own and don't worry about spelling, we never do on blogs. TIA.
      View article »
    • ON: Mon Sep 1st 13:25 PM
      Commented on:
      Can China Carry the Post-Olympic Torch?
      I have read this article many times and have forwarded it to more than 30 good and serious investor friends. Thank you agian.
      View article »
    • ON: Sun Aug 31st 11:27 AM
      Commented on:
      Light the Way with LDK
      Very good article on LDK highlighting many key points which WallStreet seem to have refused to acknowledge. Agree with Maxbid, the opportunity to accumulate on the cheap may now disappear soon. I do think solar will be so big (you gave all the reasons, I won't repeat here) that there are rooms for many players including FSLR, SPWR, etc. Thanks anyways.
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    • ON: Fri Aug 29th 06:13 AM
      Commented on:
      Can China Carry the Post-Olympic Torch?
      Mr. Jefferson, I give you a five-star! This is one of the best articles, correction, this is the best article on investment in China I have read. As an expat working and living in China for the past 20 years, I have seen the changes and can related to the many key points mentioned in the article. I also tend to agree strongly on those points relating to the direction of the economy, again, based on my experience even though the past cannot directly predict the future, they tend to show the direction. Coincidentally, many of the stocks you recommended are already in my porfolio. I strongly recommend anyone interested in investing in China to read this article.
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    • ON: Tue Aug 26th 06:11 AM
      Commented on:
      China: What Comes After the Olympics?
      I don't know whether to laugh or to cry after reading this article. Here are why:

      Quote 1: "... put together a fiscal plan to support a faltering economy..." China's economy faltering? It's growing at about 8 to 9% and people call that "faltering"?

      Quopte 2: "...the tax decline would likely continue..." Tax decline really? A few lines earlier I read that the tax is growing at 13.8%. For most other countries, tax collection growing at 13.8% will not be called a decline. Yes, there is a decline of growth but not a decline in tax collected. Personally, I like the tax growth to slow down to below GDP growth or lower. The lower tax the better let alone growth.

      Seems like, for some people, China can do nothing right. Growth of over 10% = overheating; less than 10% = slowdown. Tax growth = government grabbing too much from enterprises. Reduction in tax growth = proves decline in economy.

      Having been in China for the past 20 years, I see the economy is better than ever before (by most measurement). There are problems probably more of a growing pain but nothing fatal. I don't see doom and gloom. I see the future being quite bright. The people appear to be very happy overall especially after hosting such an successful Olympics. Maybe I just wrote something here that is not politically correct but that is what I really believe in based on my experience. Maybe those that are viewing China from far away see things that I don't. Normally, it should have been the reverse, i.e., people close to the scene seeing the sick tree but those far away seeing the healthy forest. I think I do see both the trees and the forest - in my humble opinion.
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    • ON: Thu Aug 7th 14:01 PM
      Commented on:
      The Great Bubble of China: Next to Pop?
      nick, do you mean the dalai lama to become president of china? he will need the christian almighty to help because his holiness is not going to make it on his own. If not, any candidate you can suggest? LOL.
      View article »
    • ON: Thu Aug 7th 11:23 AM
      Commented on:
      The Great Bubble of China: Next to Pop?
      About bubble. Yes the Chinese stock market index went up from about 800 to 6200 with only minor corrections of less than 10% during the big move over two years and it has come down to about 2700 now during the past few months. However, one needs to know that the components making 800 is completely different from the ones making the 6200. For example, using rough numbers from memory to illustrate my point, when the index was 800, today's giants like Petro China (the largests market value company in the world when the index was 6200), ICBC (by far the largest bank in the world) , Chinalife (the largest life insurance company in China), etc., were not even listed. Yet at their height, Petro China and ICBC were each said to have been about 20% of the index. Note, while they maybe 20% of the index each, only a small number of their shares, at one point I read it was 5% of Petro China, was floated representing about 1% of the market while the company itself was 20% of the index. I am not knowledgeable enough to talk about the bubble because when I think of those numbers, just like China's thousands of years of history most of which were prosperous and the 1,300 million population most of whom are well fed and very free, happy and fairly rich now, I am just humbled, really humbled. I remember, when I was much younger, fascinated by the stock quote screen at my brokers place during lunch hour watching the DOW trying to conquer the great 1000 mark. Some people were calling it a peak. Look back at the DOW at 1000 and compare that to Chinese index being 2700 today. I can think of how the world would be like in another 20 years. If you want to talk about China, you first have to think BIG, really BIG. Watch the Olympics, it's going to be BIG. Since I was not able to buy any tickets, I bought a suite and invited my friends just to witness the Bird's Nest. It's going to be once in a lifetime experience. Go China.
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    • ON: Thu Aug 7th 10:35 AM
      Commented on:
      The Great Bubble of China: Next to Pop?
      You may be a Chinese decendant but your knowledge of China is quite limited based on this article. You think USA will benefit from the China bubble bursting. That could be far from the truth. Currently, economists estimate that the US consumers benefit by over $70 Billion per year due to cheap Chinese products. Who is going to replace that? Do you think the jobs will go back to USA if the China bubble burst? BTW, I would just point out another reason I think your knowledge of China is limited. You said "For a brief blip in history, China had the largest economy on the earth. " Other scholars claim that for most of the past 3000 years except the most recent 200 to 300 years, China was the largest economy on earth. That does not sound like a brief blip. Just because house prices have trippled in 5 years does not mean it will drop significantly, say even by 50%, soon. You have to know what base it trippled from and what money is available in the savings accounts to pay for them. You would be surprised to know how much cash low income earning Chinese have in the banks. National savings rate is 40% for the past dozens of years. That helps fund the growth. That is not what western economists understand easily. There are too many other Chinese things that cannot be explained by the common sense of the west. While there will be adjustments and slowdown, the great growth machine is far from being a bubble yet. One day, it may become one and your article may look great. But you would have to wait for many years before that day. I may not even see that day as I am rather old and do not expect to live that long. Having lived and worked in China for 20 years, I expect the standard of living for the average Chinese people to continue to improve for at least another few dozen years. BTW, you should have said something about air polution which I would have agreed with. I have been complaining about the air for 20 years. But the economy, it is going to be fine. Polution cleanup actually will also help the economy, this factor alone will delay your bubble bursting by at least 5 years. What is 5 years, or 50 years in China's history. That's a real blip. Being the largest economy for most of the past 3000 years is not a blip.
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    • ON: Sun Jul 6th 06:22 AM
      Commented on:
      LDK Solar: The Brightest Opportunity?
      I have read many articles about LDK and this is the best fundamental analysis. Peng seems to have delivered everything he promised. I trust the polysilicon plants will be on schedule as LDK have said and that the company will reap huge benefits from it especially now that polysilicon is in such a short supply recently hitting USD400+ per kg in the spot market. Their production cost estimates, as I have read in many different places, indicate at USD80 to start and to go down to circa USD30 per kg. As to quality, I am sure the big buyers, like Q-Cell and Hyundai, that signed multi-billion dollar contracts are professional and smart people and I don't want to pretend to be qualified to try to out-guess them. The contracts talk louder than guesses or speculations. Time is on the side of LDK. Michael, thanks for sharing your analysis.
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