As a rule “penny stocks,” public companies routinely selling for less than $1 a share, and sometimes just a few pennies, make me nervous.
While the intent is laudable – to give small investors a chance to bet on long shots just like the boys on Sand Hill Road – the result has always looked like a rigged casino.
Because of its low capitalization and small float it’s easy to “pump and dump” a penny stock, boosting its value with some publicity, then selling it short. And if the deal were worthwhile, why isn’t the smart money in there already?
Needless to say I would never buy one.
Over the holidays I spied a release about Sunvalley Solar, a California company that says it has filed a patent application covering what it calls a more efficient solar cell design.
“Because of an array of nanostructures with space varying periodicity and orientation, the Sunvalley patented solar cell is less affected by the spectral wavelength, angle, and/or polarization of the incident light,” the release said.
Pretty opaque. But it seems to mean that the structures in this cell face in different directions, allowing a cell to be efficient on a wide variety of solar angles. Cool.
So I did some research on Sunvalley and found they’re a penny stock, trading over the counter under the ticker symbol SSOL.OB. (Not just a penny stock, but its shares currently sell for about four-tenths of a penny each.) Got my “spidey sense” tingling. I decided to look at it some more.
The Web site features a highly-educated collection of Chinese-Americans, most with degrees from Beijing University or Tsinghua University. In Chinese these can translate as Harvard and Yale, or Cal and Stanford. But you can be robbed by someone from Stanford as easily as one from Texas A&M in Kingsville. (Go Javelinas.)
Sunvalley also has a manufacturing deal with Baoding Tianwei Solar Films, southwest of Beijing. Tianwei is tied-in with Tsinghua University with an educational program and Sunvalley CEO Zhijiang “James” Zhang is a Tsinghua alumnus.
So it’s real on the front end. What about the back?
CEO Zhang says he needs large-scale manufacturing to proceed with his Green Farm Solar Investment Program in the Imperial Valley of California. The idea is to use government incentives to help finance thin-film development on land owned by date producers like Seaview Packing and Leja Farms, who aren’t using all their sunlight.
Real on the back end. Sort of.
Zhang believes thin film is better for these desert locations than crystalline panels, even though they are less efficient. The patent allows his panels to maintain this efficiency while remaining stationary in a field surrounded by plants.
That’s his story. Anyone buying?
It seems like Sunvalley has a business model, waiting customers, it has what seems like a new technology and a legitimate manufacturing partner lined up. I would still call it a long shot if its prospects were really that great it would have investment bankers crawling all over it.
As best as I can determine, Sunvalley decided to take itself public by buying-out an Edmonton-based outfit called Western Ridge Minerals in a reverse merger. This could let it raise capital while directors retained control. With 800 million shares it has a market cap of about $3.7 million.
It could still be a scam. Heavy promotion caused the stock’s value to rise in September, then it tanked again. Words like “shady” were used in describing it around Thanksgiving.
Some things that look like scams are. But some aren’t. Which do you think this is?
Disclosure: No Position
Dana Blankenhorn first covered the energy industries in 1978 with the Houston Business Journal. He returned last month after a short 29 year hiatus because it’s the best business story of our time. In between he covered PCs, the Internet, e-commerce, open source, the Internet of Things and Moore’s Law. It’s the application of the last to harvesting the energy all around us he’s most excited about. He lives in Atlanta.