Piper Jaffray Comments On Solar Companies Exposure To Lehman Brothers Collapse (SPWR, ESLR, JASO)

September 16, 2008 3:57 PM EDT
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Piper Jaffray analyst Jesse Pichel commented on solar stocks today related to exposure to the Lehman Brothers (NYSE: LEH) bankruptcy.

The firm noted that SunPower (Nasdaq: SPWR), Evergreen Solar (Nasdaq: ESLR) and JA Solar (Nasdaq: JASO) are all negatively affected by the Lehman bankruptcy with respect to prior convertible bond transactions and stock lending agreements. The firm said it would be prudent for investors to assume the worst case scenarios.

On JA Solar, Pichel said, "We estimate JASO would realize ~4% dilution on stock and incur a non-cash write off of $7M for the book value of the capped call, and also write off a $100M investment in a LEH vehicle."

On Evergreen Solar, Pichel said, "ESLR worse case scenario – lose the $39.5M premium if the capped call transaction with Lehman is not replaced, as well as dilute share count by 30M (~25%) without getting anything in return for the dilution."

On SunPower, Pichel said, "worse case scenario – 2.9M (~3%) share dilution."

Pichel said the downside is fully priced into shares of SPWR and JASO given only limited potential dilution. Pichel said he does not believe Yingli Green Energy (NYSE: YGE), Canadian Solar (Nasdaq: CSIQ), and Suntech Power (NYSE: STP) are impacted by Lehman's bankruptcy filing.

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