This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The 5 Dumbest Things on Wall Street This Week: Aug. 3

2. Suntech's Bond Villain

Bond. German Bond. That's why traders are using their Series 7 Licenses to kill Suntech Power (STP).

The once high-flying Chinese solar panel provider -- one of the largest solar companies in the world -- plummeted into penny stock territory this week after the company said it might be the victim of a $679 million fraud.

Suntech revealed on Monday that an affiliate in a solar development fund possibly swindled it with a phony collateral pledge of hundreds of millions of euros of German bonds. The announcement caused Wall Street analysts to question Suntech's viability -- admittedly already a big question given the implosion of the Chinese solar sector -- and send its shares below a dollar, down from over $7 at this time last year.

"We now suspect that the German government bonds may not have existed and Suntech may have been a victim of fraud," said Suntech CEO Zhengrong Shi said on a conference call.

Wait, we thought the Chinese companies traded in the U.S. were the ones committing fraud ?

Anyway, it certainly is a mystery Zhengrong. But then again, it's not a total surprise since the solar development company linked to the bond deal, Global Solar Fund, has always been something of a black box for Suntech - and hesitation point for analysts -- with many questions raised over the years about accounting between Suntech and GSF.

As to the validity of this whole German bond scam, well, that's too farfetched even for us to comment on. It would take James Bond himself to untangle this one and unfortunately he's too busy jumping out of helicopters with Queen Elizabeth.

Solving the mystery probably doesn't matter anyway. Maxim Group analyst Aaron Chew lowered his 12-month price target for Suntech to zero from 50 cents, doubting the company's capacity to cover a $541 million convertible bond that comes due in 2013 (the analyst seems to think that bond does, in fact, exist).

"While the fraud concerns the collateral backing the project debt and not the project itself, where there is smoke, there is usually fire," writes Chew, who adds that the Chinese government will most likely step in to save Suntech -- wiping out equity shareholders in the process -- since traders would reject any attempt to sell additional shares of the company.

Yes, it sure can be deadly when Mr. Market turns into Dr. No. Enough to scare the living daylights out of you. Those Suntech equity shares may soon be as imaginary as the German bonds that got it into the solar sector's latest mess.

4 of 6

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
SYM TRADE IT LAST %CHG
STP $0.53 0.00%
DNDN $0.06 -6.02%
AAPL $131.39 0.00%
GM $35.58 0.00%
KCG $13.30 0.00%

Markets

DOW 18,285.74 +0.34 0.00%
S&P 500 2,130.82 +4.97 0.23%
NASDAQ 5,090.7940 +19.0510 0.38%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs