Trony Solar: Don’t Let the Sun Go Down on My IPO

UPDATED What’s not to like about Trony Solar? The Shenzhen, China-based solar startup brought in $79 million in revenue last year and a net profit of $24 million. In the three months through Sept. 30, Trony’s revenue was $37 million – or 47 percent of its entire 2008 revenue – and net profit was $11 million. But late Wednesday, the company scaled back the amount of money it was hoping to raise in an offering of American Depositary Shares (ADS) on the New York Stock Exchange. (Update: Trony has postponed indefinitely its IPO, citing weak market conditions, according to an underwriter who spoke with Reuters Thursday morning.)

In early November, Trony filed for a $200 million IPO without specifying a price range. Three weeks later, it said its offering would be priced between $9 and $11 a share, with the midpoint $10 a share figure implying a more ambitious $242 million take. Now, according to Renaissance Capital, Trony plans to raise just $151 million by offering 19.5 million ADS at a price range of $7.50 to $8.00.

A spokesman for Renaissance, which tracks data on stock offerings, said that underwriters altered the price range Wednesday afternoon. An overbought market and lingering concerns about thin-film module prices are adding to investor concerns.

Most of that capital — as much as $116 million — is slated to help Trony expand manufacturing lines and repay a loan. The rest will go to two existing shareholders, which are selling off half of their stakes in Trony: JP Morgan Special Situations is selling $29 million worth of shares, and Intel Capital is selling $23 million.

According to Photon Consulting, Trony Solar was China’s only thin-film solar module producer ranked among the ten biggest thin-film producers in the world. In its prospectus, Trony said its manufacturing capacity had reached 115 megawatts as of August and its average manufacturing costs was around $1.12 per watt.

Despite Trony’s 16-year history and its position as a leading Chinese thin-film solar manufacturer, investors are feeling jittery. Not only has there been a rise in the number of overall IPOs in recent months — amid rising concerns that the stock market in general has grown expensive — but concerns are also mounting about a glut of solar goods next year.

Concerns that polysilicon prices are pressuring thin-film makers into cutting prices has dampened enthusiasm in the sector. Share of U.S. thin-film company First Solar (s fslr) are down 2 percent in 2009, compared to a 13 percent gain in the Claymore/MAC Global Solar Energy Index ETF (which reflects the performance of companies across several segments of the solar industry).

Despite Trony’s 28 percent net profit margin in the most recent quarter – a comfortable figure that IPO investors would normally welcome – the falling prices of solar modules have taken their toll. Trony’s gross margins fell to 39.8 percent of revenue last quarter, down from 44.9 percent in fiscal 2008.