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Gold/Mining/Energy : SunPower Announces Initial Public Offering SPWR -- Ignore unavailable to you. Want to Upgrade?

To: bob zagorin who wrote (101)	9/16/2008 5:28:43 PM
From: Eric	Read Replies (1) \| Respond to of 196

From CS this morning: SPWR Lehman implications Bottomline. SPWR stock was oversold in Monday's trading primarily due to investor concerns about potential share dilution from the shares lent to Lehman. SPWR issued a press release last night identifying shares lent to LEH at the time of the Feb '07 convert at 2.9mm shares (3% of o/s shares). In addition, SPWR indicated no cash or investments were held by LEH. In the worst case, the entire 2.9mm shares are not recovered, this will have a 4c impact to CY08 EPS of $2.31 and 13c impact to CY09 EPS of $3.98. In the best case, the company will be able to recover all the lent shares through its actions. Note that SPWR has not considered these shares as outstanding for EPS calculation. No exotic options in SPWR convert. Solar stocks on average were down 7.5% in yesterday's trading, while SPWR, JASO, and ESLR were down ~12.4%, 20.3% & 27.6% respectively – LEH was the underwriter for convertible bonds from these companies. In addition, to the converts, companies also lent common stock to Lehman to facilitate the establishment by investors to hedge positions. With Lehman's bankruptcy, investors sold off due to potential dilution concerns in case lent shares are not returned. Quantifying risk. We tried to quantify the risk for each company based on potential EPS dilution. SPWR issued 2.9mm shares (~3% of shares outstanding), JASO issued 6.5mm shares (~4% of o/s) and ESLR issued 30.8mm shares (~25% of o/s). SPWR's convert was a straight forward convert with no derivatives as compared to ESLR which had a capped call costing the company an additional ~$68mm. SPWR Implications. SPWR in the worst case should theoretically be down only 3% due to the Lehman exposure. Given no changes to our investment thesis on SPWR, we would be buyers of SPWR at these levels.