Solarfun Power Holdings has filed to come public via an IPO under the ticker SOLF. Solarfun is yet another manufacturer of solar cells and modules out of China. The Chinese company plans to offer 12 million ADS’s at a range of $11.50 to $13.50, giving the company a proposed market cap of $600 million at the middle of the range. Each ADS will represent 5 ordinary shares. Goldman Sachs is the lead underwriter and CIBC World markets is the co-manager on the IPO. The company commenced commercial sales of its main lines in 2005 and 2006, and has more factory capacity coming on line in 2007 and beyond.
If you think that this wipes out the rest of the solar players, guess again. Go visit Alibaba.com and type in "Solar Panels" or "Solar Cells" and you’ll see that there is almost an endless supply of these companies in China, India, US, Canada, and the EU. This will continue to cloud the "alternative energy" sector. It will also make it harder and harder for the established companies to make their products stand out. So many of the technologies that are used for these are so old that many of the core patents are essentially voided out, so you can have an endless list of companies in the field. Trine Solar in China just filed last week, and you can imagine all the smaller venture companies that are seeking an IPO as their instant multi-millionaire strategy will be wondering if they should follow suit.
If you back out the currency, here is a US-dollar equivalent in operations: $21 million revenues and $1.8 Million in net income for 2005; first nine months in 2006 were $48.9 million in revenues and $9.2 million in net income.
It is actually surprising that Citigroup isn’t listed in the underwriting. Citigroup’s venture arms invested with other investment groups a sum of US$53 million in June and August of 2006. There is actually a chance that the deal may price before the end of the year since it is international, so keep this name on an underwriting watch list for next week if you monitor IPO and secondary offerings.
Jon C. Ogg
December 12, 2006
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