Lots of speculation and fearThere seems to be a ton of speculation with little hope while some are growing weary from the long and difficult journey Qsolar is on. I thought I would add a little value by referencing back to some facts to hopefully give a bit more of a solid footing for those getting nervous. I also just wanted to share some thoughts.
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What do we know about the current situation (taking most of this from previous discussions on the board here on stockhouse)?
Qsolar has a minimally better product in 3 or 4 different ways, but that would be highly appealing to any investor given an option between any of the majors and theirs, provided all else equal (that includes certification for guarantee).
Qsolar was hit, along with most other PV manufacturers with the EU/China dumping battle
Management continues to pay themselves handsomely while apparently underperforming
Management (CFO) has bought high and sold even higher directly before the massive plunge.
Management continues to burn capital in a large way, BUT has been steadily reducing this in relation to the market
A large investor has provided a direly needed capital infusion for a significant portion of the company
Said large investor continues to sell shares for pennies on the 3/4 dollar even to ‘today’
The firm continues to have problems raising desperately needed funds
CEO sells more shares at pennies on the dollar to continue to fund operations
The firm has created a few longer term and/or repeat order relationships, the latest being for the off-grid emerging specialty solar products
Management originally expected certification in just a couple of weeks to few months
Management continues to offer few details on operations other than large purchase orders
Management continues to provide very few details other than a compilation of news clippings in their reports and provides little forward guidance
International Certs
IEC 61730-1 will be issued to the firm, providing an electric safety certification necessary for large scale utility solar projects
IEC 61215 will be advised upon in the future and is meant to give certification for the aging of PV solar modules
North American Cert
UL 7130 which is the certification needed for large scale utility projects in North America
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In relation to the certification process, the firm continues to tell investors that they will update them with information as soon as they find something out, which they continue to do well as per their remarks on their request for information from one of the members of China TUV SUD. However, managment clearly failed to realize how long and enduring the process of certification would be for a new class or industry standard product. This is consistently the case for managers as shown by the effect of the Planning Fallacy as pointed out by Kahneman. We often cannot fathom how long or how much resources a project will take. Results are so sparadict that we must assume incompetence when it comes to management, at least in the understanding and dissemination of project timelines and costs. This is one of the risks we as investors must assume when we seperate ownership and management of a firm. So I am saying this is not managements fault. They did not and probably could not ever understand the whole process and thus cannot accurately predict timeframes or costs. We as humans often fail at this endeavour so much so that we must assume incompetence; we are poor planners.
Looking at all of the information though, here are a few points about everything.
We know that the CEO is committed as he is selling off his shares to fund the company’s operations. We know that IF they receive all 3 certifications, or I would imagine at least the 2 international certifications, they would have the option to expand operations to a second facility. ALL of this relies heavily on whether they pick up their sales pace, which many investors seem to think will magically happen right away after certification. Then there is the speculation of a ‘buyout’, which I couldn’t imagine would happen right away anyway even IF they received the INDUSTRY STANDARD certifications. I would be very surprised if anyone other than investors and a few others even know of this company, let alone their advantage on any of the other PV manufacturers. There are so many different and nearly cost effective solutions out there that this product is but a drop in the bucket. IF the company fully realises their Kruciwatt process which would silicon use by around 40%, NOW you would be talking about some significant advantages that everyone will start to take notice of.
Really all I am saying is that in my personal opinion, until Qsolar gets at minimum the other 2 certifications AND begins to increase sales to a sustainable level, there is not investment thesis and little reason to bother fretting about the stock price.
I am not saying that everyone should get out, nor am I saying that I think you should get in, and keeping with logic that means nor would I do both or none of the above, I am just saying that there is little reason to waste so much time speculating about apparent expropriation or which houses people are trading from. It would be best at this point to just remove the emotion and ‘put up or shut up’ as they say. Trust your instinct, we usually know exactly what we should do but we often cloud that with doubt and fear. There is little point in posting negative messages to people unless you honestly believe that they will benefit from it, or you are simply hurting them by creating further doubt and fear, which is borderline terrorism (careful, I am using the actual definition of terrorism here, ie consciously instilling fear).
If you are truly positioned as a smart investor, you either have a strong and knowledgeable background in the solar PV market or the company is fundamentally increasing or maximising shareholders wealth (Cash Flows) as per Corporate Governance standards or holding to Shareholders Primacy, OR you are just speculating on the stock price, which actually has worse odds than gambling where odds and chance are at least known. The fact that the company may NOT actually be a going concern and that given history in general and their own history thus far, there is little reason to believe they will continue to be a going concern. This makes them one of the most highly speculative purchases you could possibly make and substantially increases either your margin of safety or discount rate whereby the current and nearly all prices under a dollar are completely justified due to the sensitivity of share price to extremely high discount rates. This would tell nearly all ‘rational’ market players to reduce this holding to such an extent so as to prevent a substantial draw down on their resources.
Now to throw in my personal two cents, if I was to purchase something this speculative a rational me would buy a very small stake (in relation to my total portfolio size) and wait it out in the long term. Now highly concentrated portfolios hold positions between say 2-10%, but these will be profitable producing firms. So given that Qsolar is a losing purchase at this point with little factual evidence that they will be profitable, it seems that it would be best to keep your Q position below a normal highly concentrated positions weight. This would leave me personal y with a position up to about 5%. This would allow me remove my emotions and either tactically trade the stock over the long term while building a strong position or hold or sell it based on solid reasoning. Then again, we all know we are not always and will never be rational creatures.
All the best in your future trades :)