NEW YORK ( TheStreet) -- What does an analyst who was synonymous with the big solar stock short do for an encore? The answer is to find a way to short excessive excitement about the electric car market. On Monday, Axiom Capital analyst Gordon Johnson, who had a long-time, very vocal and very profitable short on First Solar ( FSLR), launched coverage of battery maker Polypore ( PPO) at a sell. Polypore makes separators that are critical in regulating the flow of ions in batteries, including the lithium ion batteries now being developed for the electric car market.
There will be blood among suppliers of battery technology to the electric car market: analyst.
Shares of Polypore, which have risen 21% this year -- and up from a 52-week low -- were down 6% on Monday morning to $53. Johnson initiated his sell rating on Polypore with a $26 price target, implying 54% downside from its opening price on Monday. In the solar stock sector, the short argument relied on two ideas. First, that the sector was headed for massive oversupply and the market expectations for growth of sales were driving up multiples of stocks to excessive levels. Second, and when it came to First Solar specifically, the fact that key executives left the firm over a period of a few years and many insiders were selling shares suggested to First Solar shorts including hedge fund manager Jim Chanos that all was not right at the solar company. Johnson's Polypore short relies on assumptions related to both of those solar short debate points. The analyst thinks that the electric car market growth assumptions on which Polypore's multiple is based exaggerates the opportunity relative to coming supply. The analyst also points to insider selling by Polypore executives. Since January 2011, Johnson said he has noticed "a troubling trend among the executives at PPO."
CEO Robert B. Toth has sold 403,000 of his total 450,000 shares (i.e., 89%) for a profit of $24.5 million
CFO Lyn Amos has sold 52,000 of her total 64,000 shares (i.e., 81%) for a profit of $3.3 million
VP Pierre Hauswald has sold 84,000 of his total 84,000 shares (i.e., 100%) for a profit of $5 million
VP Mitchell Pulwer has sold 70,000 of his total 70,000 shares (i.e., 100%) for a profit of $3.8 million
VP Phillip Bryson has sold 46,600 of his total 54,000 shares (i.e., 86%) for a profit of $3.1 million
"Stated differently, in aggregate, PPO's top 5 executives have 'exited' 91% of their vested stock holdings since January 2011; forewarned is forearmed," Johnson wrote in his note.