Suntech Power Holdings Co. (STP), the world’s largest solar-panel manufacturer, is seeking to boost the price of its American depositary receipts after receiving a warning that they may be delisted from the New York Stock Exchange.
The average closing price of Suntech’s ADRs was below $1 for 30 consecutive days as of Sept. 10, triggering a delisting warning, the Wuxi, China-based company said today in a statement. Suntech has six months from the notice to regain compliance and notified the exchange it will “cure this deficiency within the prescribed time frame,” without saying what steps it plans to take.
The company has few options, according to Pavel Molchanov, an analyst at Raymond James & Associates in Houston
“Suntech is drowning under $2 billion in debt with a market cap that’s just a tenth of that,” Molchanov said today in an interview. “Any restructuring of that debt will make their equity worthless.” He has a rating equivalent to a sell on the ADRs.
Other large Chinese solar panel manufacturers may face the same issue. JA Solar Holdings Co. (JASO) has closed below $1 for the last 17 trading sessions, according to data compiled by Bloomberg.
A delisting is an unappealing prospect for solar module makers, said Ramesh Misra, an analyst at National Securities Corp. in New York, said today an e-mail.
“Getting delisted is not an option for any of these companies,” he said. ADR prices are “viewed as a proxy for the bankability of the module” and the manufacturers’ ability to arrange financing from investors.
Companies aren’t permitted to conduct reverse splits on ADRs, a common way to raise the price of equities, said Rob Stone, an analyst at Cowen & Co. in Boston. They may change the ratio of the underlying shares, which has a similar effect, and shareholders generally approve of such measures. “It’s in their interest to stay listed,” he said.
Suntech’s ADR, each worth one ordinary share, gained 5.9 percent to $1.08 at the close in New York.
The company’s market value has declined 51 percent this year to $195 million. Suntech has 16 sell ratings and nine holds, according to data compiled by Bloomberg. The company hasn’t had a buy rating since May.
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