The Chairman was missing in the AGM yesterday. That was the catalyst
Hope all chairmans and CEOs read this and not make an expensive mistake of skipping annual makan
(Bloomberg) -- Gravity works. Objects that fly too close to
the sun do get burned. The laws of physics apply. They just take
some time.
That must have been quite some annual meeting for Hanergy
shareholders yesterday. You go in the proud owners of a $40
billion company, and leave an hour or two later $18.6 billion
lighter. We’d like to have been a fly on the wall at that one.
What happened? Was it the non-appearance of chairman and
putative energy visionary Li Hejun? Or was Li’s failure to
attend the meeting at Hong Kong’s Kowloon Shangri-La hotel a
product of the same factor that caused the shares to collapse?
The shares were down a mere 5 percent at about 10:15 a.m.,
a quarter of an hour after the meeting was scheduled to start,
before dropping like a stone to be 47 percent lower by the time
the stock was suspended from trading 24 minutes later.
When was the last time a company lost that amount of market
value in that length of time? It’s one of many questions that
still swirl around the Hanergy enigma. One mystery has been
solved -- the solar panel-maker (apparently) isn’t worth $40
billion after all, as so many skeptics have said -- though
others arise in their place.
Why now? Yingli Green Energy, another Chinese solar panel
maker, slumped 37 percent in U.S. trading on Tuesday night,
adding to a 12 percent drop the previous day.
Yingli plunged after saying on Friday there was a
“substantial doubt” over its ability to remain in business.
The news may have soured investors on Chinese solar-company
prospects, though it’s unclear why that would necessarily affect
Hanergy, which has existed in its own alternate valuation
universe up to now. The plot thickened when Reuters reported
last night that Hong Kong’s market regulator has been
investigating Hanergy for several weeks for market manipulation.
The stock had climbed more than sixfold in the past year
before yesterday, in the face of short sellers, media articles
questioning the company’s “unconventional” accounting
practices and dependence on its parent for revenue, and baffled
attempts by analysts to make sense of the company’s valuation.
The trouble is, you can justify almost any price for a
stock by adjusting the underlying assumptions in a discounted
cash flow model. If Hanergy really has discovered the thin-film
panel secret sauce that no one else in the world has managed to
crack, who can say for sure it isn’t worth what the market said
it was. You know when the elastic is stretching, though.
At best, Hanergy’s technology is unproven. The industry is
littered with examples of companies that have developed the same
type of solar cells as Hanergy and ended in bankruptcy.
If Li’s absence was the trigger for the stock’s plunge, it
may yet recover. Chairmen going AWOL have been an ominous
indicator for Chinese companies in the past. That may be one
reason the company posted a statement after the suspension
saying that its chairman spoke at a clean energy exhibition in
Beijing yesterday. Maybe he’ll skip the next show and attend the
shareholders’ meeting instead.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward
Think Asset-Business-Structure (ABS)