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Mailbag: Is it time to Buy LDK at $30?

Posted December 7, 2007

Baltimore — (TFN) Here's another great question from one of our readers about Chinese solar cell company LDK Solar.

Question: Your report recently touch on the question of whether TFN will recommend buying LDK if it falls below $30. Would you please comment on LDK now as it has actually fallen below $30? Thank you very much.

E. Lim

Answer: LDK Solar (LDK: NYSE) finally fell below our buy price of $30 at the end of November.

You can buy LDK if you’d like. But I’m not going near it until I know that the company’s cheap new method for making solar cells out of recycled silicon is a viable plan and not just interpretive science similar to its accounting department’s interpretive balance sheet.

Right now, LDK is sitting on either a whole bunch of reclaimable silicon or a few million pounds of rubbish, depending on who you ask. The company says it could someday have the technology to process the silicon into gold (which means solar cell wafers, in this case), even if it can’t do it now. But a former employee says the piles of waste ingots and recycled wafers are junk that, in fairness to its stockholders, the company should write off.

If LDK is actually able to make solar cells from recycled silicon, the rewards will be enormous. The cost for fresh silicon continues to rise, and, with the advantage of using materials that the rest of the industry sees as waste, LDK will undercut its competitors with lower manufacturing costs. If it can’t, then we’re back to the old solar cell business model, and we need to take a fresh look at the company.

Let’s wait a few more weeks to find out what the external audit says about the company’s stockpiles of prognosticating silicon.

In the meantime, another law firm has filed a class-action suit against the company. That makes at least three suits that I know about. I don’t think this is the end of LDK’s nose-dive. And I’d hate for our members to be caught in the turbulence.

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Posted by Stephanie Grimmett · Filed Under News that Matters 

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