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LDK Solar - Minus $639 Million In Negative Book Value Makes The Stock Value Zero

Jul. 01, 2013 2:04 AM ETLDK Solar Co., Ltd. (LDK)4 Comments
Sneha Shah profile picture
Sneha Shah

LDK Solar (NYSE:LDK) is surviving due to the benevolence of the Chinese government. The company has made monumental blunders in the past and has executed dreadfully on its strategy. The company used to be the world's biggest supplier of wafers and built a giant 15,000 ton polysilicon plant. However, the company faced massive time and cost overruns which created a massive $3 billion debt mountain. The plant now lies idle as it is unable to compete with other low cost polysilicon companies. The company's expansion into other parts of the solar supply chain has also failed. The company sold one of the world's largest solar cell factories for a pittance and the company's foreign downstream acquisitions have also shut down (Sunways). The company's market share has crashed along with its revenues. The company has already defaulted on its debt twice and the only chance of its survival rests on a new loan from the government owned Chinese Development Bank. Even if the loan comes through, the company has no way to service the more than $200 million in annual interest payments. The company currently has a large negative book value and why the company supports a ~$220 million market capitalization is a mystery to me. Investors can easily look to short this stock to zero with little risk.

LDK's 15,000 ton polysilicon plant lies idle

LDK's biggest failure was its inability to build a cost efficient polysilicon plant. The construction took too much time and money and never managed to reduce its costs to a competitive level. Despite building a plant with 15,000 tons of capacity making it one of the top polysilicon players, the company has never managed to ramp production to make decent profits. The current polysilicon price ranges between $15-20/kg while LDK's production costs are north of $25/kg. The company can only

This article was written by

Sneha Shah profile picture
I am Sneha Shah, the Editor-in-chief of Greenworldinvestor. A Chartered Accountant by profession, with interest in Finance,Green Industry, Economics and the Indian Market.

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Comments (4)

DJHLS profile picture
Recent news from the Chinese government caused a short squeeze, but it changes not to much. I assume Chinese government will pay just minimum prices for the modules.
Obama loves solar. So, this stock is worth at-least $100.
DJHLS profile picture
LDK is a chinese black box. May be there are hidden assets, but the current management doesn't act in the best interest of all shareholders.

There are obscure deals of a Chinese Holding buying shares for about 1 USD, whilst the ADR's are traded at 1,4 USD. May be we will soon see a new majority shareholder and a squeeze out. Anyway, the non-chinese lenders and shareholders won't get adequate returns.
nolaig profile picture
Sorry the poly plant is 33000tonnes not 15000tonnes
they only achieved 15000 operational tons before the
crisis of over production.
LDK have finished the plant and is ready to fire up
when poly is above $20/tonne hoping to achieve between $10-15/poly production.

As regards the "hydrochlorination" upgrade that is happening with a $72million
loan from CDB.

There has been huge dilution of stock with new Chinese Investors and board
members taking control. I wouldn't write off LDK just yet as they have over
$450MW of EPC work in the pipe line.
Look at CSIQ how there stock price is appreciated.

I'm not invested in LDK but will wait to see how things play out
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