Tuesday, September 16, 2008

Stay the Course (seriously...)

I know the phrase "stay the course" has earned a pretty bad reputation, given its use by one of the world's worst dictators, but I think it is highly applicable in the current financial situation.

Many of us (SRInvestors) have lost significant amounts of money. Those of us who are purists may not be invested in any major banks (since most of them fund fossil fuels and other SR no-nos) but lots of the upstart cleantech companies that saw such phenomenal stock growth last year are tanking as the banks that loaned them money tank.

Case in point: Evergreen Solar and Lehman Brothers.

Quoted from Barron's:

In July, Evergreen issues $373.75 million of convertible notes. In connection with the deal, the company loaned 31 million shares to Lehman Brothers International (Europe) for hedging transactions. The company had originally concluded that, since the shares were to be repaid when the convert came due, the stock did not have to be included in EPS calculations. But now the company says it may have to include the additional shares in calculating EPS, diluting existing holders by about 19%, according to J.P. Morgan analyst Christopher Blansett. And the reason is obvious: the company may not ever get repaid for those shares.

The company had also paid another Lehman affiliate $39.5 million for a “capped call transaction” intended to reduce potential dilution by effectively increasing the conversion price on the notes. Blansett notes that the company “will likely be unable to recover” any of that cash.

This particular conundrum is probably unique to Evergreen, but in general the worsening economy is bad news for green technology, as its causing oil prices to sink and making investors far more risk averse - two things that could spell doom for the sustainable business paradigm.

Be strong, my fellow SRInvestors! Economic downturns do not last forever (that's why they are called "economic cycles"). Ours is not a game for the weak of heart, for those who cut and run at the first sign of a trouble. Green investing is a treacherous road, especially when it comes to cleantech. If you want stability, I suggest you invest in AEP (please don't), but if you want to make money while making the world a better place, now is the time to batten down the hatches and ride out the storm.

So stay the course, I say, as the markets will improve. As long as the companies you have invested in have solid products, business strategies, and partnerships, they will recover and you will be on the way to living the high, sustainable life.

Here's to weathering the storm!

The Social Investor

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