Hedge Funds Short Clean Energy as Goldman Pares Stakes

Hedge funds increased short selling in U.S. renewable energy stocks to the highest level in a year, boosting bets against First Solar Inc. and Tesla Motors Inc. as government support for low-polluting technologies faltered.

Seventeen percent of the freely traded shares of the 35 U.S. stocks in the WilderHill New Energy Index are sold short, compared with 16 percent in October and 15 percent in August, data compiled by Bloomberg show. That’s almost four times the 4.4 percent short ratio of the Standard & Poor’s 500 index.

In the run-up to this week’s global climate talks in Mexico, short sellers targeted makers of wind turbines, solar panels and electric cars whose sales also were undermined by cash-strapped European governments cutting subsidies. Goldman Sachs Group Inc. and BlackRock Group trimmed long positions in renewable-energy shares in the third quarter, filings show.

“The lack of an international agreement on climate change and short-term uncertainty on policy support across the globe makes the sector fairly susceptible to predatory trades from hedge funds,” said Krishnan Shakkottai, a market analyst at Bloomberg New Energy Finance in London. Republican gains in U.S. mid-term elections are “a huge deal,” he said.

Photographer: Ken James/Bloomberg

Uncertainty over future subsidies has cut installation of new wind turbines in 2010, the American Wind Energy Association said. Close

Uncertainty over future subsidies has cut installation of new wind turbines in 2010,... Read More

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Photographer: Ken James/Bloomberg

Uncertainty over future subsidies has cut installation of new wind turbines in 2010, the American Wind Energy Association said.

President Barack Obama said he may be unable to reduce U.S. greenhouse-gas emissions after Republicans regained control of the House in Nov. 2 elections. Republicans say they will seek to roll back Environmental Protection Agency rules limiting carbon venting, ease curbs on coal mining and may try to block billions of dollars in federal subsidies for clean power.

Zoltek, American Superconductor

Uncertainty over future subsidies already cut installation of new wind turbines in 2010, the American Wind Energy Association said. The industry added 395 megawatts of capacity in the third quarter, the least since 2007, the AWEA said.

Zoltek Cos., a maker of carbon fiber for blades used in wind turbines, and American Superconductor Corp., whose converters connect those machines to power grids, were among the most-shorted stocks, according to the data, which doesn’t include investor names.

Investors borrowed 4.4 million Zoltek shares to sell, 16 percent of its float, according to Bloomberg data. American Superconductor has 27 percent of its traded shares loaned to short-sellers, who promise to buy back the stock at a later date, hoping to acquire them at a discount to the price they received. At First Solar, which is 25 percent shorted, spokesman Alan Bernheimer declined to comment.

Goldman Sachs sold 178,441 American Superconductor shares in the third quarter, reducing its stake by a third while Deutsche Bank cut its holding by 5 percent, according to regulatory filings. Investment firm BlackRock, the company’s second-biggest shareholder, reduced its stake to 9 percent from 12 percent. The stock has since gained about 9 percent.

Tesla Ranks Top

Goldman Sachs’s London-based spokeswoman Fiona Laffan, Deutsche Bank’s Mayura Hooper in New York and BlackRock’s Lauren Trengrove in New York declined to comment. Spokespeople for Zoltek, First Solar and American Superconductor didn’t return calls seeking comment.

The most-shorted stock was Tesla Motors, the California electric carmaker headed by Paypal Inc. founder Elon Musk, which gained about 60 percent this month after it sold a $30 million stake to Panasonic Corp.

Investors had shorted 65 percent of Tesla’s free-float as of the latest data compilation, dated Nov. 15. Almost 90 percent of the company’s stock is controlled by major shareholders including Musk, Toyota Motor Corp. and Abu Dhabi Water & Electric Authority. Tesla’s press office didn’t respond to an e- mail seeking comment.

AutoNation Shorted

By contrast, the most shorted stock in the S&P 500 was AutoNation Inc. Speculators had borrowed 34 percent of the free float of the Fort Lauderdale, Florida-based car retailer.

Solar panel makers are also suffering as European governments, struggling to contain the fallout from the financial rescue packages requested by Greece and Ireland, curb rates paid for power from photovoltaic panels.

“We are just coming off a period of strong fundamental performance and we expect demand to weaken sharply,” Robert Clover, global head of clean power research at HSBC Plc in London, said in an interview. Clover forecast that global panel demand will drop 50 percent in the first quarter of next year from the previous three months.

Photovoltaic Panel Demand

Still, U.S. demand for photovoltaic panels may offset the declines in Europe as falling panel prices allow utilities to build industrial-scale solar generators, according to Shayle Kann, an analyst at GTM Research in Boston. Kann forecasts U.S. power companies will install 5,000 megawatts, or $8 billion, of solar panels annually by 2015.

Investors have shorted 25 percent of the shares of Tempe, Arizona-based First Solar, the world’s biggest solar module producer, and 22 percent of SunPower Corp., its rival based in San Jose, California.

Goldman sold 17 percent of its holding in First Solar in the third quarter and Deutsche sold 28 percent. Edgewood Management LLC, Calamos Advisors LLC and Morgan Stanley also cut their holdings in the stock, U.S. regulatory filings show.

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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