Chinese solar companies are being forced to use their liquid assets to buy their own stock to offset a major sell off rather than saving the funds or using the cash toward new projects. Stock prices are plummeting due to decreasing solar panel prices. “LDK Solar (NYSE:LDK) has already bought back $110 million worth of its shares this year. Yingli Green Energy (NYSE:YGE), ReneSola (NYSE:SOL) and JA Solar Holdings (NASDAQ:JASO) plan to buy back up to $100 million each, while JinkoSolar Holding (NYSE:JKS) intends to repurchase $30 million,” reports Reuters.
The companies are being forced to buy anywhere from 15 to 50 percent of their total value. Buybacks are a common practice for cash-rich entities who are trying to reduce float and increase their share price. However, not everyone agrees with this practice as many analysts voice concerns over the companies’ increasing debt.
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Thiemo Lang, a senior portfolio manager at Sustainable Asset Management, which owned Yingli, Canadian Solar and Trina Solar shares as of July, told Reuters, “The idea to increase your debt level by buying back shares does not make sense. It’s a bit strange to see companies who need all the cash to expand production buying back stock.” Lang continues by speculating that these companies would only be doing this to show investors that they are concerned about their stock prices and are working to protect share price and therefore shareholders’ investments.
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