Will Trina Solar Go Private?

The solar industry is booming all around the world, but solar stocks seem to defy the fact as they do not seem to reflect the same in their movements. We hear a lot about the bright prospects of the solar industry and news stating that solar is poised to become the largest source of power in the very near future. The investors in the solar companies’ shares will resonate my thoughts on the same. The price movements in these stocks do not replicate the strong outlook of the solar industry and the growth it promises.

This is mainly because the costs of solar components is falling fast. As such it is difficult for Tier 1 solar companies to post large profits. Hence I have always recommended investing in solar stocks only for the long term. The prospects of solar is strong and these companies will benefit in the long run. Solar technology has developed at exponential rates in the last few years. As the industry matures, these solar companies will have more clarity towards the cost and pricing structures. It is also amazing to see how some of the large tier 1 solar companies have managed to survive so far, given their strong balance sheets or technological advancements or ability to manage costs.

Also read our list of 12 Biggest and Best Solar Panel Companies In The World

Why Trina Solar is Going Private?

The Chinese can be held responsible to a great extent for the plight of the current solar manufacturers. Some of the top Tier 1 Chinese companies have managed to keep costs low, while not compromising on quality. This has led to a major revolution in the global solar market at large. However, these Chinese solar manufacturing companies did not receive the valuation (on the U.S stock exchange) that could justify their talents, in sharp contrast to their western counterparts like First Solar (NASDAQ:FSLR) and SunPower Corp. (NASDAQ:SPWR). This has resulted in many of the large Chinese companies planning to de-list from these stock exchanges.

Back in December, Trina Solar (NYSE:TSL), one of the largest solar panel manufacturer not only in China but also globally, approved its plan to merge with Fortune Solar Holdings Limited (Parent) and Red Viburnum Company Limited (Merger Sub). Pursuant to the merger which is expected to close during the first quarter of 2017, public shareholders will receive $11.60 per share from the group. Trina Solar is one of the largest solar panel companies with 6.5 GW of solar panel production capacity and huge shipments. The company has almost 50% of its revenues coming from markets other than China and also reported achieving new efficiency level of 22.61% for its monocrystalline silicon PERC cells.

Shares of Trina Solar rose almost 3% in the two months of December and January, while the last two months saw shares increase by almost 14%. The shares are currently trading very close to the 52-week high price. Many of us would have lost money in the investment, but solar investment is not for the weak-hearted or for a short term investor.

Trina Solar was the No.1 solar panel company by shipment for 2014 and 2015 consecutively, only till the last year when Jinko Solar surpassed to become the global leader. Note in the past Jinko Solar (NYSE:JKS) too had planned to go private which failed to materialize later. Though it looks like Trina Solar’s deal will go through, we will have to wait and watch. With Trina Solar’s huge gigawatt sized factories, improving efficiencies and a large global footprint, the investors would have benefited over long term. While the market thinks that Chinese companies initiate these deals just to boost share prices, I see it as an opportunity lost for investors who wanted to leverage from the growing solar industry.