Wednesday, October 31, 2007

A missed call

I generally don't give investment advice--and that is a good thing. There is one merger that I commented on last year (11 months ago anyway) between Sunpower and Powerlight. At the time Sunpower was trading around $40/sh and I felt that the merger was a defensive move to ensure a market channel for their panels in case the silicon shortage unwound rapidly. (Sunpower at the time was (I believe) the largest domestic module maker, but certainly a quickly growing force in supplying solar modules; Powerlight was perhaps the largest system installer in the US.)

Today the silicon shortage has yet to unwind, but we have seen a big change in the average size of panel installations. Whereas five years ago installations of 25-50 KW were notable, today it seems that installations have to be at least 500KW or more likely 1MW to get industry press attention. The combined Sunpower seems to be focused on this scale issue and seems to have gotten out in front by combining organizations. At the very least Wall Street continues to like the deal--the combined Sunpower is trading over $125 today. 3x in less than a year is a very good return in anyone's book.

Too bad that return doesn't figure into my book...


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