Editor's note: Less than an hour before the close, First Solar was down $4.75, or 9.08%, to $47.54. This piece was originally posted at 11:40 a.m. EDT.NEW YORK ( TheStreet) -- Shares of First Solar (FSLR - Get Report) were taken to the woodshed after investors learned of sales delays and a shelf offering of up to 9.98 million shares of stock.
The primary driver behind the stock's price action during after-hours trading on Wednesday and into Thursday was the shelf offering of almost 10 million shares of stock by the company. The timing of this offering reminds me of pharmaceutical companies. Relatively small start-up pharmaceutical companies are notorious for delivering announcements that send shares higher, quickly followed by stock offerings that dilute the value of existing shares. If the underwriters are able to place every share allowed into the market, current shareholders will be diluted to the tune of about 16%. FSLR Ending Cash Quarterly data by YCharts
First Solar doesn't appear to have a balance sheet problem in relation to its cash flow -- especially not after accounting for the company's reaffirmed $4.00-$4.50 per share 2013 earnings guidance. Why is First Solar issuing equity instead of debt when credit is so relatively cheap?
Before you ask that question, keep in mind that The Wall Street Journal has other news about company stock buybacks by many other companies. Some companies are issuing debt for the sole purpose of buying shares. Apple (Apple) and General Electric (GE) come to mind.