"Solar's Short-Squeeze Days Are Numbered." It's hard to judge when logic will regain control over emotion, but if there is a lesson to be learned, it's that emotion is a sprinter and logic is a marathon runner. It can take time for logic to catch up, but it always does. I made up for the early-bird article with another more timely warning titled "First Solar May Have Just Signaled It's Overvalued." Although First Solar didn't display a need for capital injection, the solar company disclosed a shelf offering of almost 10 million shares. Although it's not unheard of in the technology space, it's far more common for pharmaceutical companies to sell shares to shore up working capital. Typically, they do it after FDA approval or another positive catalyst. But First Solar enjoys one of the best income and balance sheets in the space. Granted, it's more or less the cleanest shirt in the dirty laundry bin, but the shelf offering seemingly came out of nowhere. Management stated one of the possible uses for the capital injection was to go shopping for acquisitions. Buying other solar companies is somewhat of a head-scratcher because First Solar's advantage is supposedly its lower cost for a given amount of energy produced. Why buy plants that produce solar cells at a higher cost than your own, especially if you have to pay a premium? I'm sure there are some unique situations that can provide synergies and growth potential, but production capacity restraints don't appear to be limiting the revenue. In other words, First Solar knew it should go to the well while the going was good. First Solar did buy General Electric's ( GE) intellectual property rights for cadmium telluride solar technology; however, GE received stock instead of cash. GE must hold 1.75 million shares of First Solar for three years. If First Solar buys something significant within the next 12-18 months, I will evaluate it in relation to the capital injection, but until then, I'm sticking with the idea that First Solar sold shares because management thought it could receive more cash than the shares were likely worth.
Unlike last quarter's guidance report, the Company is reducing 2013 full-year net sales because it expects to sell two system projects after completion, delays in government approvals, higher expected higher operating expenses, and costs related to the above mention shelf offering. In other words, today isn't nearly as sunny as the day after last quarter's report. On a brighter note, First Solar is the one to catch in this space, and it doesn't appear any of the others have their running shoes on. Yingli Energy Holding's ( YGE) shares have moved off the bottom, but the company is losing money. LDK Solar ( LDK) is officially on my death watch. LDK is so pathetic that the stock makes Lotto ticket buyers appear to be exemplary stewards of capital allocation. Bottom line: Expect First Solar to be trading for less than $40 by the end of this week. At the time of publication, Weinstein had no positions in stocks mentioned. Follow @RobertWeinstein This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.