So in my previous post I mentioned Evergreen's exposure to Lehman. Apparently, SunPower will have similar issues, though not as grave. Quoted from MarketWatch:
"Concurrently with our February 2007 offering of $200 million principal amount of 1.25% senior convertible debentures due 2027, we lent 2.9 million shares of our class A common stock to LBIE. The lent shares were to be used by Lehman Brothers Inc., the underwriter in the offering and an affiliate of LBIE, to facilitate the establishment by investors of hedged positions in our class A common stock. We did not receive any proceeds from our lending of class A common stock to LBIE, but we received a nominal lending fee of $0.001 per share.
...
While the share lending agreement does not require cash payment upon return of the shares, physical settlement is required (i.e., the loaned shares must be returned to us at the end of the arrangement). In view of this and the contractual undertakings of LBIE in the share lending agreement, which have the effect of substantially eliminating the economic dilution that otherwise would result from the issuance of the borrowed shares, to date the borrowed shares have not been considered outstanding for the purpose of computing and reporting our earnings per share. Excluding the 2.9 million class A shares lent to LBIE, as of August 29, 2008 we had 85,739,000 shares of common stock issued and outstanding, comprised of 43,705,713 shares of class A common stock and 42,033,287 shares of class B common stock."
SunPower is one of my largest holdings, and though yesterday it sank to 52-week lows, today it has rallied - and I expect it to continue to rise, as Lehman's bankruptcy will not affect it as strongly as it will affect Evergreen.
My holdings of Evergreen, on the other hand, are not faring well.
I will stay the course - at this point, I don't have much more to lose.
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.
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.
Okay, while I will continue to cover green investing, I am going to just start pitching my leftist views on pretty much everything.
Here is a letter I sent to a bunch of newspapers in response to a MoveOn campaign asking people to write about how ridiculously out of touch with this place called "reality" Mr. McCain really is.
Enjoy.
Dear Editor,
With the elections looming in November, I have begun to reflect on the two main candidates - Barack Osama…er, Obama, and John “Patriot” McCain. After much thought, I’ve come to a conclusion: John McCain is the only candidate that’s good for America. He’s got a solid, realistic view of the American economy, and that view centers around the fact that there is nothing wrong! Why fix what’s not broken? Allow me to elaborate.
First, John McCain supports oil, the only American fuel. Liberals like to moan about how he wants to give $39 billion more subsidies to oil companies, despite the fact that the four largest oil companies (Exxon, Shell, BP, and Chevron) made over $1 trillion in revenue in 2007. This is a great idea! I mean, a trillion is a big number, but isn’t capitalism (and, thus, America) about rewarding the most important services? What’s more important than providing the gas that allows me to drive my SUV the three blocks from my house to the grocery store?
Barack Obama thinks that Americans should “walk” or “ride bikes”. He thinks the government should instead spend my hard-earned money on “renewable energies”, to fight things like things like “global warming” and “peak oil”. Global warming? What a laugh! Last night, it was like 50 degrees out! In summer! How is that POSSIBLY considered “warm”? And excuse me, but if the Gulf of Mexico runs out of oil, we’ll just drill in ANWR. I mean really, who needs trees? If God cared about the environment, he wouldn’t have put it all around our oil reserves. Worst comes to worst, we can always invade Iran. I mean, democracy for oil is a fair trade, right? The answer is “yes”.
Even if this so-called global warming is happening, McCain knows that rising seas will just make it easier to buy beachfront properties, and higher temperatures will make it easier to enjoy them! This brings me to my next point: there is no “housing crisis”. To those of you who lost your homes because you took subprime loans hyped up by big banks, expect no sympathy from McCain; you’re just whiners, and whiners are un-American! Besides, think of all those poor Wall Street bankers! All those write-downs – I mean, that HAS TO cut into the $2 million Christmas bonus! I think everyone should take a page from McCain’s book and marry rich. Then you could conveniently ignore “economics” and still afford seven houses! That’s the American way to go! Besides, who buys a house on credit? McCain says that you’re only considered rich if you make more than $5 million, so the average middle-class family should be able to pay cash for a $1 million home, right? What were all those poor people thinking, buying houses on credit? Get jobs first!
Frankly, John McCain’s policies echo the policies of another great President: George W. Bush. President Bush’s economic policies have done wonders for our country, and we’re now in a time where the “true” middle-class enjoys wonderful prosperity, especially those who work in the truly American oil and defense industries (let’s forget about the poor – they’ll complain no matter what). That’s what John McCain says anyways, and I believe him because, frankly, questioning is un-American.
Welcome to Invest in Society, the blog for people who want to make money by doing good. I know it's hard to find good, free resources for socially responsible investing (SRI) out there, despite the magic of Google, so I will be blogging about investing in publicly-traded companies that don't follow the norm - that take care of their employees, develop technologies to make our world cleaner and friendlier, and abide by common-sense business ethics.
Aside from discussing the business practices, stock movements, and sustainability of a company, I will also give it an SRI rating from 1 to 5.
A company with an SRI rating of 1 would be a company with an inherently unsustainable product, a company that treats employees on all parts of the supply chain poorly, contributes to human rights abuses around the world, and acts with reckless disregard for the welfare of customers and the environment. An example would be Exxon Mobil, a company that produces oil and natural gas. Exxon is a solid investment for institutional shareholders, who don't care about what their money does (other than make more money). The company pays high dividends, has a solid share buyback strategy, and is the largest public company in the history of the world. Exxon is not a socially responsible investment, however, because it is accused of human rights abuses around the world, sells a product that contributes to global warming and is in danger of running out, spent twice as much in 2007 on share repurchases than on exploration and production (thereby contributing to sky-high gas prices), and paid just $5 billion in taxes to the U.S. government in 2007, despite revenues over $400 billion and a gross profit of $86 billion.
A company that would merit a 5, on the other hand, is Nacel Energy Corporation. From the company site:
"Nacel Energy is engaged in the business of generating clean, renewable energy from wind. We offer shareholders the unique opportunity to participate in America’s fastest growing energy business and in the development of utility class wind power generation projects located in Texas, Kansas and soon internationally, in the Caribbean and Latin America. The total planned generating capacity of Nacel Energy’s new wind domestic energy projects is 80 MW – enough energy to power 25,000 American homes.
Nacel Energy is one of the first wind energy companies in America developing COMMUNITY WIND – utility class power generation from wind turbines with a sustainable footprint of 20-30 MW and local investors.
Nacel Energy builds beneficial partnerships with local COMMUNITY WIND developers by offering a unique solution to two of their biggest obstacles – (1) the absence of a tax-efficient structure to utilize Federal and/or State incentives for wind energy development and (2) the scarcity of capital for early-stage projects. The solution is called WINDVEST™ – a proprietary capital structure and process which enables Nacel Energy to successfully joint-venture with local wind energy developers, expedite timelines and improve project economics."
Wind energy is an inherently sustainable technology, and part of Nacel's business is to make it easier for communities to build wind installations. The company's business also involves getting local investors to fund utility-scale wind farms - a green idea in that local energy generators are beholden to local shareholders, who understand local issues best. Plus, the company is committed to paying future dividends to shareholders - always a plus.
So now you know the format.
I'll close with a quote from one of the history's greatest economists: John Maynard Keynes.
"The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelope our future."
Educated academically at Yale and practically at Wikinvest, The Social Investor, AKA Avinash Gandhi, is a passionate environmentalist and economist, with the desire to make social responsibility the norm - one investor at a time.
