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First Solar CEO Gillette Leaving, Shares Collapse

(First Solar CEO Rob Gillette departure story, updated for details on recent executive departures at First Solar, rumors of infighting, and analysis of industry weakness)
NEW YORK ( TheStreet) -- First Solar (FSLR - Get Report) CEO Rob Gillette, hired less than three years ago to mark a new era in management of the largest solar company in the U.S., is leaving, an unexpected development adding to the woes of a stock that has seen its value severely eroded this year.

First Solar announced Tuesday afternoon that chairman and company founder, Mike Ahearn, will serve as interim CEO.

"Effective immediately, Rob Gillette is no longer serving as Chief Executive Officer, and the Board of Directors thanks him for his service to the company. The Board of Directors has formed a search committee and is initiating a search for a permanent Chief Executive Officer," said the company, a member of the S&P 500, in a tersely worded press release that created more questions than it answered, and as a result, led to a swift investor reaction.

First Solar shares fell by close to 25% shortly after the news was released on Tuesday afternoon. The shares, already near a 52-week low in recent trading, hit a new 52-week low after the news of Gillette's departure, closing at the $43.27 mark.

First Solar has been a favorite target of the shorts, and they have profited handsomely as the shares have capitulated in the past six months, from a high earlier this year at the $180 mark, to the recent free fall as the solar industry has gone through a massive correction, and Tuesday's cratering.

One of the hallmarks of the short-seller attack -- at least the part of the bear case not based on industry fundamentals -- against First Solar has always been the mass defection of senior executives, which has been a regular repeat occurrence in recent years at the highest ranks of the company.

In this respect, the headline about Gillette's departure -- without any explanation for his leaving -- is a serious blow to the company's case that its future is bright. First Solar President Bruce Sohn -- responsible for overseeing its manufacturing process -- and financial chief and head of its utility business, Jens Meyerhoff, left in the past year, and were just the latest and most high-profile of a handful of senior executive departures.

First Solar may hope that Ahearn stepping back into the CEO role while a search is conducted will limit the damage from Gillette's departure -- and it's typical for a chairman to fill the CEO void on an interim basis -- but the market was signaling the extent of how negative this news was being received on Tuesday afternoon. Ahearn's recent history at First Solar, too, has been a part of the short case against the stock, from his departure to his heavy insider selling, rather than a rebuttal of it.

There are still several analysts with buy recommendations on First Solar and target prices ranging from $150 to $190 -- though Goldman Sachs recently reduced its price target from $150 to $90 this month. Yet the only price target First Solar is close to now is the one offered by noted First Solar bear and analyst at Axiom Capital Gordon Johnson, who has a target price of $38 on First Solar shares.

Johnson speculated on Tuesday afternoon -- the company wasn't talking beyond its prepared statement-- that it's possible with earnings season coming up that Gillette was not willing to sign off on the company's financial statements. There is a long history of comment letters going back and forth between the Securities and Exchange Commission and First Solar over its accounting for large-scale solar projects it has in development, and the biggest of these to date, Agua Caliente, starts hitting the revenue line in a significant way in the third quarter.

First Solar announced after the close -- several hours after it announced the departure of its now-former CEO Gillette -- that it will report earnings on Nov. 3.
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