Friday, September 23, 2011

Selective Financial Disclosure? First Solar May Have Violated Reg FD (FSLR)

Disclosure is sort of the entire reason for the '33 Act, much less Reg FD.
In late pre-market trade the stock is at $65.50 down another $1.35.
From The Street:

Did First Solar Just Walk a Fine Reg FD Line?
(First Solar story updated for clarification of comments from Maxim Group and Collins Stewart analysts) NEW YORK (TheStreet) -- Shares of U.S. solar company First Solar(FSLR_) slid by 7% on Wednesday, possibly due to the company reportedly hinting to some investors and analysts that one of its three large-scale solar projects would not receive a loan guarantee from the Department of Energy, as first reported on TheStreet on Wednesday.

On Thursday morning, the company made it official, putting out a press release that said its Topaz project, one of the larger U.S. solar projects ever to be planned, would not receive a government loan guarantee, a day after some analysts and investors said First Solar was spreading the word.

Aaron Chew, an analyst at Maxim Group, called the company on Wednesday early in the evening for clarification of reports he was hearing about Topaz. While Chew says they did not outright tell him the Topaz DoE loan guarantee would not go through, they did indicate they now saw a "much lower probability" of it happening which to him suggested it was in all likelihood "a done deal." First Solar also told the Maxim analyst it was in negotiations with a buyer with a low-cost of capital for the project. The next morning, First Solar announced that it would not receive a DOE loan for Topaz, and negotiations with a buyer with a low cost of capital, a specific factor that could make financing attractive even without the federal loan guarantee.

That comment alone to the Maxim Group analyst the night before the press release could very well be a violation of Regulation FD, said Bryn Vaaler, professional services partner at Dorsey & Whitney and Reg FD expert. On Wednesday afternoon, a First Solar spokesman was quoted in a Marketwatch story giving no indication that any of the First Solar projects was out of the running for a loan.

Several analysts and investors have expressed a concern that First Solar is walking a fine line in these comments, as well as frustration, citing the Securities and Exchange Commission's Reg FD, which stipulates that an officer or director of a company cannot make any disclosure of a material nature about its business on a selective basis.

In the end, it may be that First Solar violated the spirit of Reg FD: it may turn out that First Solar realized that it was walking too fine a line, or that there was some other form of unintentional leak and the company issued the Thursday press release as a result. Regulation FD has a safe harbor that says "If the Company learns that it has unintentionally disclosed material nonpublic information, it must publicly disseminate the information within 24 hours."...MORE