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Solyndra shelves initial public offering

22 Jun 2010

Developer of lightweight thin-film solar modules based on CIGS has instead raised $175 million through a private sale of its stock.

The Californian start-up Solyndra, which is developing photovoltaic systems for rooftop applications, has withdrawn its plans to raise $300 million through an initial public offering (IPO) of stock.

Having instead raised $175 million through a sale of promissory notes, the company gave its reason for not proceeding with the IPO as “due to adverse market conditions and the availability of alternative funding from existing investors”.

“This funding allows us to address strong customer demand by maintaining our aggressive growth plans," said Chris Gronet, the CEO of Solyndra, who cited ongoing uncertainties in capital markets.

Solyndra originally filed an S-1 registration statement with the US Securities & Exchange Commission (SEC) in December 2009, since when the market conditions for an IPO have not declined noticeably – witness the successful recent stock offerings by Rubicon Technology and InPhi.

With speculation that Solyndra's $175 million placement includes some onerous terms, the reality may well be that Solyndra's own financial predicament may be more to blame than general market sentiment.

Since its 2005 formation, Solyndra has generated revenue in each of its past two fiscal years – the most recent ending January 2, 2010, in which it posted sales slightly in excess of $100 million.

The only problem is that this revenue came at a cost of $162.2 million, equating to a gross profit margin of minus 60%. With research and development alone adding a further $84.5 million to operating costs, Solyndra’s net loss during 2010 came in at $172.5 million.

Bad though that sounds, it did represent a significant improvement in the previous fiscal year, when Solyndra had only just begun to make sales.

Nevertheless, as of January this year the company held cash and short-term investments totaling only $50.2 million, and negative working capital.

It is of course normal that a company entering such a capital-intensive industry – never mind just at a time when the price of competitive technology was falling through the floor – should burn through plenty of cash in its early years.

But it appears safe to conclude that the extent of Solyndra's loss-making – a deficit of $558 million had been built up by January 2 this year - made the IPO unviable, at a time when Wall Street is no longer willing or able to throw its cash around with such abandon.

Gronet had indicated that the IPO was on shaky ground when the company published an open letter to customers and suppliers on its web site in April. In it, the CEO described an IPO as "just one avenue" being explored by Solyndra for obtaining capital.

Solyndra must now use the $175 million private placement both to fund existing operations and maintain some aggressive growth plans, including production from its "Fab 2" manufacturing complex.

"Fab 2 can't come on line a minute too soon," says CEO Gronet of the current expansion plans. Construction of Fab 2 began in September 2009, after Solyndra secured a $535 million loan that was underwritten by no less an authority than the US Department of Energy.

That deal is sufficient to finance the bulk of the so-called 'Phase 1' part of the Fab 2 project, which should ultimately bring an annualized production run-rate of 250MW on line by mid-2012.

Solyndra had been expecting to use the proceeds of the aborted IPO to partly fund the next stage in that expansion, which it calls 'Phase II'. In September 2009, the company applied for another DOE-guaranteed loan of $469 million to further support the expansion.

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Synopsys, Optical Solutions GroupPhotonTec Berlin GmbHPhoton Engineering, LLCOmicron-Laserage Laserprodukte GmbHDelta Optical Thin Film A/SCobolt ABSchaefter und Kirchhoff GmbH
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