ReneSola (SOL) is down 64.9% from its near 10-year high set in January. The company celebrated that high by announcing a secondary stock offering…its fifth in 4 months. SOL came back stronger and better from the first four secondaries of the series. The fifth secondary stock offering finally broke the bank (meaning ReneSola overwhelmed the capacity of investors to absorb the supply of new shares).
The table below lists the results of each of the last 5 secondary stock offerings. I cannot recall a time ever seeing a company reach for the till this often and this frequently. The first secondary occurred while SOL was still trading in the low single digits: the stock traded below $1 just 4 months prior. SOL promptly lost 11.8% the next day but fully recovered in 9 trading days. SOL dropped in the wake of the next two secondaries only to recover in less time. The rebounds were so predictably strong that SOL actually rallied in the immediate wake of the fourth secondary: traders decided to get an early start on the rebound. ReneSola took the cue and less than three weeks later, the company went to the till again….and this time broke the bank with a massive $250M take.
| Date (links to the SEC filing) | Share Count | Share Price | Gross Value | Stock Reaction next day | Count of trading days to full recovery |
| 9/23/20 | 2,500,000 | $ 2.00 | $ 5,000,000 | -11.8% | 9 |
| 10/12/20 | 1,538,462 | $ 3.25 | $ 5,000,000 | -18.3% | 3 |
| 12/23/20 | 2,105,000 | $ 9.50 | $ 20,000,000 | -19.2% | 2 |
| 1/7/21 | 2,500,000 | $ 16.00 | $ 40,000,000 | 7.0% | n/a |
| 1/25/21 | 10,000,000 | $ 25.00 | $ 250,000,000 | -21.9% | n/a |
SOL has not been the same since the fifth secondary broke the bank. The sell-off is not just related to the overall pullback in alternative energy names and the overdue resolution of bearish conditions in the stock market. When SOL dropped 21.9% in the wake of the fifth secondary, the Invesco Solar ETF (TAN) lost 1.7% and closed just off its all-time high. TAN experienced a shallow pullback and soon rebounded for a fresh test of its all-time high. Meanwhile, SOL continued to implode before consolidating briefly.
SOL’s take is impressive. The last 4 secondaries were for ever increasing amounts. The last secondary was larger than the first 4 combined. All told, the company raised $320M. That amount is nearly HALF the size of the company’s market cap of $720.6M. I am surprised SOL is not trading a lot lower after this kind of massive shareholder dilution. Certainly, the generosity of the stock market puts ReneSola in better financial shape. Renesola reported holding just $15.6M in cash and cash equivalents at the end of September, 2020 (compare that to $36.4M of debt, a $440M accumulated deficit, $9.7M in revenue in Q3, and negative operating cash flow).
The Trade
During the previous heyday of solar energy stocks, SOL was one of my favorites. This persistent shareholder dilution now makes SOL unattractive to me despite the strong financial condition. The company sent negative signals about what it thinks about the company’s valuation by first selling so many shares at super-low prices and then dumping such an enormous secondary at the near 10-year high.
First Solar (FSLR) is an example of a solar stock I greatly prefer given its financial and management muscle. Also, Invesco Solar ETF (TAN) offers a way to invest in the space without taking on company-specific risks like the ones SOL poses for investors.
Be careful out there!
Full disclosure: long FSLR
I wonder if Renesola had underwriters repeatedly calling to tell them their stock was overvalued and they should take advantage of it?
Regarding selling new shares frequently: many REITs and BDCs have At-the-Market (“ATM”) arrangements whereby they can sell stock into the market any time they want, without the overhead of an official secondary, underwriters, etc. I haven’t looked into the details of any, but I presume they have authorization limits so as not to scare major investors away. A mirror image of buybacks, actually.
Seems to me if ReneSola had set up an ATM, they could have kept the party going longer.
*Someone* was ringing the bell over and over again! And given the current sell-off, they did ewll to make hay why the sun was shining…so to speak.