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We Warned You: Energy Conversion, One More Solar Bankruptcy

Stocks in this article: ENER

NEW YORK ( TheStreet) -- Energy Conversion Devices (ENER), the U.S. solar manufacturer, entered Chapter 11 bankruptcy on Tuesday.

TheStreet warned investors the company would be entering bankruptcy at some point in the future, as a way of scratching our heads at the more than 100% run-up in Energy Conversion shares this year (not that it took much in the way of foresight to see this one coming. Common sense should have prevailed upon anyone with a head on their shoulders to assume bankruptcy was a fait accompli for Energy Conversion).

"Guess that recent rally from $0.30 to $1.50 was all for naught," remarked Morningstar analyst Steven Simko, who maintained all along that Energy Conversion Devices did not have the capital to make the cost reductions that would be required to compete.

The bankruptcy shouldn't come as a surprise to anyone familiar with basic solar economics, where high-cost manufacturers like Energy Conversion are at a severe disadvantage in today's oversupplied, low cost, commoditized solar panel environment.

Shares are down 78% on Tuesday and back near the 30-cent mark.

The only issue in Energy Conversion's bankruptcy was timing. Because its convertible notes weren't due until 2013, there was a chance that the company wouldn't be forced to act until that bond deadline. Energy Conversion said in a release about its bankruptcy, though, that it had reached an agreement with 70% of the company's $263.2 million in outstanding 3% Convertible Senior Notes due 2013.

In reality, the handwriting had been on the wall for longer, decades actually. In 30 years of operation, the company never turned a profit.

Energy Conversion was able to sell its battery subsidiary to BASF for $58 million. However, the company now faces the grim prospect of trying to find a buyer for its solar manufacturing operations in bankruptcy.

Solyndra, the most high profile of all the recent solar bankruptcies, recently failed to find any buyers interested in its manufacturing operations. The valuing of bankrupt solar manufacturers so far hasn't supported a view that larger companies see beyond scrap value in these companies.

-- Written by Eric Rosenbaum from New York.

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>To contact the writer of this article, click here: Eric Rosenbaum.

>To follow the writer on Twitter, go to Eric Rosenbaum.

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