LDK Solar Shares Plunged: What You Need to Know
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 Chinese solar specialist LDK Solar (NYS: LDK) have been rather cloudy today, with the stock falling by 11% at the low, after the company announced it was building a third polysilicon plant.
So what: The new plant will have annual capacity of 30,000 metric tons and help triple the company's polysilicon production. LDK currently makes around 17,000 tons of the material between two other sites, but their combined annual production is expected to increase to 25,000 tons by mid-2012. Altogether, the company will be increasing capacity to 55,000 tons annually by the end of 2013.
Now what: Investors are skeptical at the prospects of even more polysilicon flooding the photovoltaic market, which has already been burdened with oversupply lately. With the price of polysilicon plummeting, shareholders are justifiably wondering if this is the best time to make even more of the stuff, especially since LDK has previously expressed its interest in spinning off its polysilicon business. Right now there are just too many Chinese solar companies, and some of them are bound to fail.
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At the time this article was published Fool contributorEvan Niuholds no position in any company mentioned.Click hereto see his holdings and a short bio. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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