Principal Solar’s “Unique Roll-Up Strategy”

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Tom Konrad CFA

Last week, the announcement that Principal Solar, Inc. was now available for public trading landed in my inbox.  It’s currently trading under the symbol PSWWD.PK but will transition to PSWW.PK on June 23rd.  I went ahead and used the latter in our Solar Stocks list.

Principal Solar logo.pngThe press release was remarkable only for the lack of hard facts about the company, focusing instead on the bright future of the solar industry. But experienced investors know that an industry can have a bright future while the individual stocks tank.  A rising tide need not lift all boats. a rising tide could, in fact, smash most of the current boats against the rocks while new, more efficient competitors set sail at high tide.  That certainly has been the pattern in solar manufacturing.

Despite the fluff in the press release, I thought the Principal Solar strategy might be worth investigation.  They plan to concentrate on “rapidly advancing… solar energy through a unique roll-up strategy.”  Since Principal is planning on rolling up solar developers and installers (as opposed to manufacturers) I thought that this was at least interesting in that there are few, if any solid  pure-play solar installation companies available to public stock investors.

Other developers I’m aware of are Envision Solar International (EVSI.OB), which designs attractive solar for parking lots, but lacked financial muscle when I looked at it a year ago, and California-based Premier Power Renewable Energy (PPRW.OB) and Real Goods Solar (RSOL) neither of which I have yet looked at deeply.  Not totally unique, then, but one of just a few publicly traded options.

Although the California firms are better established, I decided to take a deeper look at Principal.  The near complete lack of substance in the press release perked my interest, if only to see if I could unearth any information that might be useful in an investment decision.

I continued to find a lack of hard facts.  An inquiry to the company’s PR firm confirmed that they have not released any financial statements, but they plan to release financial information mid-summer.  While reverse mergers like the one Principal undertook are notorious for their lack of transparency, the lack of any financial statements (even unaudited) takes opacity to a new level.  I declined an interview with CEO and former telecoms entrepreneur Michael Gorton.  No doubt Gorton is a great communicator and visionary, but I’m more interested in numbers.  Without those numbers, i.e. audited financial statements, I would not touch any company with the proverbial ten foot pole. 

When the numbers do emerge, it might be worth another look, but I’m not optimistic.  A scan of the management bios shows a lot of telecoms and IT experience but much less solar industry experience.  One of the four bullets in their “Core strategy” is “Establishing the Company as the market thought-leader by issuing thoughtful and timely White Papers and impactful press releases to the mainstream media.”  In other words, a key part of their core strategy is public relations.  I much prefer dull companies that are poor at communicating their story but good at making money.

As they say in the company’s home state of Texas, Principal Solar seems to be “All hat and no cattle.”  Maybe that will change come mid-summer and the promised financial information, but I’m not holding my breath.

DISCLOSURE: No Positions.
DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.


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