IPO Daily Watch: GT Solar’s Great IPO Give-Back (SOLR)

When investors lose money they are generally not happy campers.  When it happens in an IPO-related investment that is supposed to be a “Hot-IPO” they tend to feel duped far more.  Today came news that GT Solar International, Inc. (NASDAQ: SOLR) paid out funds to settle two IPO-related lawsuits.  You can imagine the move… Investors losing money in a solar-related IPO when the energy peak had already been seen.

The company does not have to admit any wrongdoing here, which may seem amazing to some.  More likely, it is the investment banks that over-promised here.  The total settlement of $10.5 million will be broken out by a $9.5 million payment from the company’s insurance for directors and $1 million will come from the company itself.

Here is what happened and why this sum seems almost silly.  GT Solar was one of the last solar companies to make it out via IPO.  It waited until the end of 2008 and that was months after oil peaked and after the solar valuation bubble was getting the air let out of it.  Shares opened above $12 and briefly hit $14 before the late-2008 market slide dragged shares all the way down to about $3.00.

The good news is that GT Solar was more a victim of the stock market and the economy than it was to its own fallacies.  Revenues were $544.2 million in fiscal-2010, $541.02 million in fiscal-2009 and $244.05 million in fiscal-2008.  GT Solar actually has a March-end for its fiscal years, but Thomson Reuters has estimates of $850.06 million for 2011 and $944.9 million for 2012.

This is one of the instances where you could easily blame the company.  It is also an instance where blame is much harder to prove.  Companies often miss IPO-windows and bear markets (and even economic crashes) do occur.  It is likely that the insurance company was just wanting to get this off the books and pressed for a settlement.

If today’s news was truly damaging, GT Solar shares would be down more than 2.1%.  Consequently, its shares are trading around $10.72 even after the drop and the 52-week trading range is $4.90 to $11.95.

JON C. OGG