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First Solar gets burned on stock offering

June 12, 2013: 10:54 AM ET

First Solar's stock has been on a tear this year.

Shares of First Solar cooled Wednesday after the solar panel maker said it planned to sell 8.5 million shares in a secondary stock offering.

Secondary offerings are always good news-bad news situations.

First the good news. First Solar's stock has rallied nearly 70% this year, ahead of the offering. Demand for solar panels has been growing. The company swung to a profit in the first quarter.

That creates prime conditions for the company to raise capital through a secondary offering -- a healthy and prudent move.

Now the bad news. Well, it's not really bad news per se. You'll often see a company's stock fall after a secondary offering because it increases the number of shares outstanding and cuts back, or dilutes, the ownership stakes for existing investors.

Investors are a fickle bunch. While it's probably a good thing in the long run, no one likes to see their ownership watered down.

All of this offered plenty of fodder for StockTwits traders to chew on.

herbgreenberg
Like the old days: $FSLR has EIGHT underwriters on shelf offering. THAT'S 1 way to ensure positive coverage!

Eight is great! But there are more analysts than underwriters for First Solar.

Maxim Group kept its sell rating on the stock and a $42 price target. They say the offering doesn't "meaningfully alter" their view of First Solar.

ronin245
$FSLR so whos shorting here raise your hand?

Ha. Short interest is actually down about 15% in June. But looking at the ebbs and flows of bets on a stock decline, we'll probably see some shorts coming out of the woods soonish.

Maxim analysts were cautious about the stock offering. They say it will be "dilutive" to earnings, so that may attract some of those downside bettors.

lamonicabuzz
Secondary sunburn. First Solar filed for 8.5 million share offering yesterday after bell.$FSLR down 6% pre-market.

That premarket move definitely wasn't looking pretty but the stock seems to be making a comeback. While it fell nearly 6% once trading opened, shares are now down only 2%.

xtremezz
"@xtremezz$FSLR Down in AH on stock offering but already bouncing. Needs 49.60 to confirm strength, though" A few tests of 49.60 and up up

leopardtrader
The time to buy was at the worst time yday. Chasing without prior plan kills the account$SPY $FSLR

You know what they say: Hindsight is always 20-20.

Maxim thinks the company needs to be booking more business. The capital inflow will help First Solar bring some undeveloped projects to fruition but it remains to be seen whether that will be enough to offset the dilutive impact on its earnings.

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Catherine Tymkiw
Catherine Tymkiw
News Editor CNNMoney

Catherine Tymkiw is a news editor at CNNMoney where she helps oversee breaking news coverage and futures planning. Previously, she was the investing editor. Prior to joining CNNMoney, she was the online editor at Crain's New York Business and has nearly two decades of reporting and editing experience. She tweets @ctymkiwcnn

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Stupid Stock Move of the Day
#StupidStock Move of the Day! $LAKE down. But only to $14.60? Raising $ in private placement @ $10/share. Why should you pay more than that?
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