The GreenStalk

Solyndra’s S-1

Posted in Solar by Paul Grana on April 26, 2010

Solyndra’s IPO is providing tons of good fodder for gossip these days.   For those unfamiliar: this is a high-flying CA solar startup that is making a novel-designed solar module (cylindrical), and which has raised hundreds of millions of dollars from private investors (plus the DOE loan guarantee program).  The S-1 filings, both the original S-1 and amended S-1, have been covered extensively by the industry media.

The consensus thinking is that Solyndra is too expensive and too capital intensive.  In fact, they received a going concern warning from their auditors.  This is largely correct. But I’ve been doing some digging of my own, and have a couple more findings.

Margins are improving

The amended S-1 included a quarterly P&L that wasn’t available in the original S-1.  And at the quarterly level, the margin story looks much better.  The gross margin was only negative (29%) last quarter:

SOLY Quarterly Sales and Margins

SOLY Quarterly Sales and Margins

In fact, positive gross margins are even visible on the horizon.  Chart the quarterly numbers, and you can see the trend.

SOLY Margin vs. Revenue

SOLY Margin vs. Revenue

If you extrapolate the revenues/cost trend from Q3 to Q4 (adding $5.2MM in sales, and only adding $1.7MM in cost), they will reach breakeven at quarterly revenue of about $60MM.  Extrapolation is always tenuous (particularly when the curve above doesn’t look linear), but the bottom line is that Solyndra is much closer to positive gross margins than the chatter would have you believe.

Management got hit?

It appears that the management team has taken a big equity hit – a 43% drop, to be exact.  Take a look:

SOLY Cap Table (Original vs. Amended S-1)

SOLY Cap Table (Original vs. Amended S-1)

Follow these links for the exact pages on the Original S-1 and the Amended S-1

Reading the fine print, it sounds like many of their options might have expired out of the water?  For example, Gronet’s original S-1 footnote says: “Includes 10,000,000 shares issuable upon the exercise of options exercisable within 60 days of October 3, 2009, none of which will be vested.”

So since the options weren’t vested, then the shares went away?  Hard to tell with all the legalese – any lawyers out there want to help me out?  But regardless of the cause, the bottom line is that the management team’s share of the company has fallen to 5.5%, from 9.4%.

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2 Responses

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  1. Coach said, on May 11, 2010 at 4:14 pm

    I heard the board of directors decided to clean house starting with the CEO!

    • Paul Grana said, on May 12, 2010 at 11:34 am

      Coach, that may be the case, but everything I’ve heard (from people who would know) is that these managers are the best in the business. They have apparently achieved or beaten every goal they’ve set for themselves. (Seems like positive margins were never on the list…)

      That being said, you never know when goodwill runs out. But I haven’t hear that is the case yet.
      Either way, it’s interesting to watch!


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