Why ReneSola Shares Plummeted

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of solar manufacturer ReneSola plunged 20% today after announcing the pricing details of its registered stock offering.

So what: Management priced its direct offering of approximately $70 million in American Depositary Shares (ADS) -- each representing two shares of the company -- at a price of $4.67 per ADS, which is about 15% below yesterday's close of $5.49. Given that wide of a discount, as well as the size of the offering, investors are obviously concerned about the sale's dilutive potential.

The offering, which will also give investors 35% warrant coverage, with an initial exercise price of $6.04 per ADS, is expected to close on September 16. But, while some of the short-term financing risk has been lifted, the below-market sale serves as yet another reminder of ReneSola's precarious financial position. When you couple the company's ongoing losses with its still-hefty debt load, the stock is probably best left to more speculative types to play with.

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The article Why ReneSola Shares Plummeted originally appeared on Fool.com.

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