Shares of U.S. solar company First Solarhave dropped about 7 percent this week on concerns about a federal review of the company’s recent acquisition of rival OptiSolar, which was first reported by the Los Angeles Times on Monday.
However, in a note to clients on Wednesday, Pacific Crest analyst Mark Bachman called the story “sensational, at best.” A day earlier, Cowen and Company analyst Robert Stone said “the issue looks overdone.” Both have “outperform” ratings on First Solar.
According to Bureau of Land Management spokeswoman Jan Bedrosian, the U.S. Department of the Interior’s inspector general is probing whether OptiSolar’s applications to develop 136,000 of public land were included in the value of the $400 million deal.In the event of an acquisition, applications can be transferred from one company to another, Bedrosian said, though no value can be attached to them.
“There is no value associated with a mere application, which could be rejected by us for a variety of reasons,” Greg Miller, renewable energy program manager for the Bureau of Land Management office in Moreno Valley, told the Los Angeles Times, saying the agency was trying to weed out speculators who are snapping up land only to turn around and sell it for a quick profit.
In March, First Solar said it would buy OptiSolar’s pipeline of solar projects, including a major installation for California utility Pacific Gas & Electric and other nascent deals. The move rapidly expanded the company’s presence in the fast-growing market for utility-scale solar.
On Wednesday, Pacific Crest’s Bachman said he expected the probe to “be remedied quickly in favor of First Solar.”
“In our view, the value in the OptiSolar deal was based on the near-term project pipeline… and the 1.3 GW of short-listed projects, thus the BLM applications are upside to the deal,” Bachman wrote, saying the review should not be weighing on the stock.
First Solar shares were down 3.5 percent at $177.94 in afternoon trade on the Nasdaq. They had closed at $190.29 on May 29, the last trading day before the Los Angeles Times story appeared.
Photo Credit: Reuters/Steve Marcus (A solar photovoltaic array at Nellis Air Force base near Las Vegas. Note: the panels were not made by either First Solar or OptiSolar)
