FSLR's CEO Sale - (Neutral):*First Solar CEO Michael Ahearn, the company's 2nd largest shareholder, has sold HALF his stake in the company over the past 1.5 years
*As of May 16th 2008, Ahearn had reduced his stake in First Solar (FSLR) from the 6.1 million shares he held at the company's IPO in November 2006 to 3.07 million shares
*Before reading TOO much into this + For some perspective...The stock has climbed 15-FOLD from the offer price of $20/share to a record close of $311.14 on May 1, 2008. At its current price of $240/share, First Solar has a market value over $19 billion, more than twice that of General Motors Corp. (GM), the world's largest carmaker. Its P/E is 97 compared with an average of 23.2 for the companies in the Standard & Poor's 500 Index
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*FSLR's CADIUM Dilemma - (SCARY STUFF):
*Demand for First Solar's panels has outpaced production, and the company has sold 80% of its planned output this year
*First Solar believes its solar panel design is the cheapest in the industry, with production costs as low as $1.14 per watt, 1/4 the expense of most competing silicon-based systems
*FSLR's technology applies cadmium-telluride to glass in a patented process that converts sunlight into electricity without costly processed silicon...fyi, spot prices for polysilicon doubled to $500 per kilogram this year per Suntech Chief Executive Officer Zhengrong Shi
*Cadmium is a toxic metal according to the U.S. Labor Department + has been linked to breathing and kidney disorders. CADIUM is banned from use in batteries and related electronics in the European Union, where First Solar gets more than 90% of its sales
*The Phoenix-based company told investors in a Feb 21 SEC regulatory filing that its cells made of toxic cadmium-telluride may be banned in the European Union, its biggest market...An expansion of EU restrictions to solar cells would make the company's current technology "impractical''
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*Anecdotally, WOW this is a tough one. I love First Solar's fundamentals, including:
1.) FSLR is the Lowest Cost solar energy producer in the sweet-spot of an Amazing GROWTH industry
2.) FSLR will benefit from higher U.S. solar spending should a Democrat be elected to the White House
3.) FSLR is and will continue to benefit from higher WW spending on solar energy assuming crude oil prices remain above $80 a barrel
Fundamentals aside - I can understand the CEO's aggressive selling given FSLR's HUGE run UP (15 FOLD increase in 18 months!!!). Still, with that being said, is 50% ownership too much for ANY company's CEO to sell/take off in such a short amount of time ??? Did the CEO anticipate issues with FSLR's toxic cadium technology ???
Random
Thought
Of
Brilliance
Considering -
1. CADIUM seems be at the HEART of FSLR's COMPETITIVE ADVANTAGE...FSLR is the lowest cost solar energy producer BECAUSE they do NOT use silicon !
And
2. FSLR receives 90% of its sales from Europe !
... Can this EU-Cadium issue snowball into becoming a FUNDAMENTAL THREAT against FSLR's 'best of breed' business model ? ?
Lots of BIG questions and honestly, not enough answers. While I'm itching to pick up more shares of FSLR this recent development may be a negative GAME CHANGER and put MY investment thesis behind FSLR in Jeopardy. As a result, until I get some more clarity on this situation (maybe CADIUM can be easily substituted for...but is the clean substitute CHEAP??!), I'm going to avoid adding to my existing position.
http://www.bloomberg.com/apps/news?pid=20601103&sid=ao86oapk9iBA&refer=news
Data Courtesy: Bloomberg
Full Disclosure: I own shares of FSLR.
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