Does the Stock Market Drive Capital Investments in Renewable Energy Startups?

Peter, I enjoyed your last article, “How Would a Recession Affect the Solar Industry?” One thing you didn’t mention, though, was small private startup renewable energy companies. How will the mess in the stock market effect small business? Will access to venture capital be limited this year? How will startup companies in renewable energy get funded? — Deep P., Los Angeles, California

Thanks Deep. Obviously, you must be involved in a small private solar startup? Best of luck to you!

In answer to your questions, in the short term the “mess in the stock market” will more than likely be reflected in lower valuations being given by investors (private investors, public investors and venture capital) to private solar companies. Solar is still a “hot” industry sector, but solar/renewable companies will have to give up a greater percentage of their company for investment funds and the entire investment process (start of due diligence to funding) will likely take longer.

Longer term it will really not make that much difference. I firmly believe that we are only at the very initial stages of a vast worldwide “solar and renewable boom” and that the future is still extremely bright for solar entrepreneurs everywhere.

Unfortunately, in the U.S. far too many investors take a very short term view of investments and industries. As a result, private U.S. companies may pay a greater relative penalty as a reflection of recent stock market action than European companies may pay, because European investors (generally) take a longer term view on investing.

Since you mentioned the recent ‘stock market mess,” I thought I would create an informational table to show how solar stock performance since the beginning of the year compares to the general market.

Solar Stock Performance from January 1st 2008 – March 7th 2008

Symbol

Name

Performance %

ASTI

Ascent Solar Technologies, Inc.

-44.7

CSIQ

Canadian Solar Inc.

-27.3

CSUN

China Sunergy Company Ltd.

-58.4

DESC

Distributed Energy Systems Corp.

25

DSTI

DayStar Technologies Inc.

-56.3

EMKR

EMCORE Corporation

-35.7

ENER

Energy Conversion Devices Inc

-19

ESLR

Evergreen Solar, Inc.

-49

FSLR

First Solar, Inc.

-26.3

JASO

JA Solar Holdings Co., Ltd

-39.9

LDK

LDK Solar Company Ltd.

-52.2

SOLF

Solarfun Power Holdings Co.

-69

SPIR

Spire Corporation

-38.5

SPWR

Sunpower Corporation

-54

STP

Suntech Power Holdings ADR

-58.6

TSL

Trina Solar Limited

-41.5

WFR

MEMC Electronic Materials, Inc.

-16.3

YGE

Yingli Green Energy Holding Company Limited

-60.5

 

 


 

Average Solar Stock Performance

-37.64

 

 


 

Widely Followed Indexes Performance


DJIA

Dow Jones

-10.3

SPX

Standard & Poors 500

-11.9

NASD

NASDAQ

-16.7

 

 


 

Obviously, both the general market and solar related companies especially have had a terrible start to 2008. Solar stocks, on average, are down close to three times more than the general market. In addition, looking at all of the stocks from a technical point of view they are all still in strong downward trends and DO NOT look like they have found a bottom.

However, keep in mind that in 2006 and 2007 solar stocks STRONGLY outperformed the general market. This strong current downward trend is nothing more than the solar sector going through a necessary a periodic correction of obvious excesses.

The solar future is BRIGHT, but you can be certain that it will be full of successes, innovation, the eventual awakening of America’s energy awareness (thank God) and unfortunately, the typical volatility of a new emerging industry.

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I have worked, for 33 years as an independent analyst and investor in small emerging technology companies. I have been actively involved in following developments in the renewable energy sector since 1977 and am regarded as an expert in this field. I was the contributing editor for the past 17 years to the Photovoltaic Insider Report, the leading publication in Photovoltaics industry that was directed at industrial subscribers, such as major energy companies, utilities and governments around the world. I currently am a consultant to a number of technology and solar related companies. I can be reached via e-mail at: solarjpl@aol.com. Visit my website for the promotion of solar energy - www.sunseries.net

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