RE Insider, July 7, 2003 – AstroPower Inc. has created significant angst within the renewable energy sector and the investment community. Their delay in reporting Securities and Exchange Commission (SEC) Form 10-K for 2002 and, subsequently, SEC Form 10-Q for 1st Quarter, 2003 has blown open the door for speculative conclusions of impropriety and/or failed technologies.The stock dropped in price this year from around US$6 a share to under US$2 from the beginning of March to the end of April. Because of these filing delays, Nasdaq has given notice that AstroPower may be delisted from their system. Nasdaq, a shareholder-owned for-profit company mindful of the commercial implications, has given Astropower the fifth letter “e” on their symbol which means “the company is delinquent with or has not made its required SEC or other regulatory authority filings”. Maybe Nasdaq believes justice is not always found from a rule book as they seem reluctant to drop AstroPower, unlike a number of independent law firms and short sellers. Numerous lawsuits have been filed this year, and rightly so, as damages to stockholders have been relatively significant during the last twelve months, with the stock down from around US$20. This has been a period of flat performance in the stockmarket (YoY) and reasonable indications of a fairly solid, albeit variable and competitive, photovoltaic market. The lawsuits are predominately only about stock losses that had occurred last summer when the stock dropped from US$15 a share to US$7 a share. Back then, the Street was surprised by the European weakness in PV sales over that summer and especially in Germany. But at that time, few were claiming AstroPower management of negligence. Where were the law firms then? Normally, lawsuits are filed fairly soon after damages. The short sellers were quicker to identify trouble at AstroPower and have been winners for the last year. The short interest continues to increase and was 5.5 million shares, or 29.3 percent of the float, according to Multex as of June 9, 2003. I was recently told by UBS Paine Webber that there was no more AstroPower stock left to short. The company has stated that it will more than likely issue a restatement of numbers, possibly numbers already CEO/CFO certified. Like AstroPower, many other corporations are under intense fiduciary scrutiny with the emergence of the Sarbanes-Oxley Act of 2002 and other regulations about privileged information. It has been a communications tightrope for AstroPower and US corporate management in general. Craigmillar Partners LP bought and sold this stock numerous times over three years and currently we own it. Wellington Management, a highly regarded Boston-based asset management firm with around $300 billion in assets under management, seemed to have increased their ownership of 1.6 million shares, reportedly filed on February 12, 2003, to 2.6 million shares on Feb 14, 2003. The stock was then trading around US$6 a share. If they still own it, would their investment policy force them to sell if the stock was delisted? AstroPower is not alone in experiencing financial pressure within the energy business. I attended Deutsche Bank’s Electric Utility conference last month, during which a number of energy firms presented their view of the industry, their particular position and how they plan to cope in this post-Enron era. Over 90 percent of the presentations that I heard focused on next month’s refinancing or this quarters’ expense reduction program. There were few discussions on energy supplies and sources, new energy technologies and/or expectation for profit. But the need for energy is constant and the overall energy business environment is fundamentally sound. Wellington and/or other institutional investors may have dropped their coverage of AstroPower but we have not. Why not? Because I can imagine the new and old management pondering a few sections of the Sarbanes-Oxley Act of 2002. This is a bill written to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws. Such as, Section 302, where the CEO and CFO must certify the audit report and Section 305, where the CEO and CFO may have to reimburse material noncompliance restatements. With numerous law firms watching for the slightest provocation to recover shareholder losses, it is reasonable for management to be highly cautious. This “no comment” period may have been perceived, at times, as too negative by the market. Ideally, I wish management/board could have an open dialogue with the investment community during periods of significant stock price swings. It’s hard to fully appreciate market dynamics and not take this period of “no comment” and “delayed filings” as “writing on the wall”. The company has watched its stock drop below US$2 a share with lawsuits lining up, the continued delay in reporting and the strain on marketability through delisting per Nasdaq rules, all without comment. Does the investor who shorted the stock under US$2 dollars have a claim of management negligence when they may have to cover for a loss? Probably not. Is a company remiss in not acknowledging possible significant stock pricing misconception in the marketplace? Probably not. But long shareholders as well as shorts deserve more transparency that is inherent to the Sarbanes-Oxley Act of 2002. I am optimistic that new management will take a more balanced approach going forward. About the Author… Robert S. Preston has 25 years investment experience with senior positions at AXA, Nomura, Rothschild and Paine Webber. Founder of Craigmillar LLC, General Partner to Craigmillar Partners LP and Craigmillar Energy LP. BA from Tulane University and MBA University of Edinburgh, Scotland. In 1979, he founded American Solar Design, Inc., a company that financed, designed, built and managed solar thermal micro-utilities in Northern California. The following stocks mentioned in this article are currently owned by Craigmillar: Astropower.