Daniel Englander
Was the GT Solar IPO a Hit Job? August 1, 2008 at 11:06 AM
Sometimes, in the heat of battle, you miss a few details. While reviewing the carnage from last week’s GT Solar IPO, I came across a Boston Globe piece that briefly mentioned something a lot of people overlooked. “GT Solar didn’t need money,” the article read, “choosing to go public only so private investors who bankrolled the company could cash out on some of their investment.” Wait wait what? Call me naive - maybe this happens more than I think - but I find this to be totally shocking.
Here’s the rundown. GT Solar is run by a group called GT Solar Holdings, which is owned by two venture capital firms - GFI Energy Ventures and Oaktree Capital Management. Going back through the story, it’s pretty clear GT Solar didn’t really need the $500 million it raised for expansion. The company’s sales quadrupled last year to $244 million that backed up $36 million in income. It has a strong presence in China, counting (until late last week) LDK Solar as one of its major customers, and a current order backlog of around $1.3 billion. All in all, a pretty strong financial position for a company well-placed within the solar supply chain. With the large number of new polysilicon manufacturers coming online or planning to come online in 2008 and 2009, you’ve got to believe GT Solar was looking into the future and seeing nothing but strong growth and big sales.
But GT Solar the company and GT Solar the investors are two separate entities. I think what happened here is that GFI Energy and Oaktree Capital spent a little too long staring down a recession-riddled bear market with little exit opportunity, got antsy about making some money, and pulled the trigger a little too quickly. Greed might have been an issue too - at least one analyst commenting over at CNet thinks the company’s stock was overpriced by as much as two times. Underlying this silliness is the fact that GT Solar the company saw no money from its IPO, further compounding the evidence that the company wasn’t hurting for growth capital. In fact, even following the IPO, GT Solar Holdings still holds about 75 percent of the equity in the company.
One problem with this situation is that it damages further the already damaged IPO window for venture-backed greentech companies. Everyone thought GT Solar was going to be a rockstar out of the gate, but it dropped 11 percent on its first day and 13 percent on its second day - costing GT Solar Holdings about $58 million. That GT’s backers blew this one on such a massive scale may put a damper on some of the companies waiting in the wings, especially those with bleaker market potential.
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[...] Here’s the rundown. GT Solar is run by a group called GT Solar Holdings, which is owned by two venture capital firms - GFI Energy Ventures and Oaktree Capital Management. Going back through the story, it’s pretty clear GT Solar didn’t really need the $500 million it raised for expansion. The company’s sales quadrupled last year to $244 million that backed up $36 million in income. It has a strong presence in China, counting (until late last week) LDK Solar as one of its major customers, and a current order backlog of around $1.3 billion. All in all, a pretty strong financial position for a company well-placed within the solar supply chain….MORE [...]