[Guest joshchang]

those warrant does have value and as i analyzied in one sol warrant thread, the true cost to investor is face value of issuance minus market value of warrants. the warrant value can be determined by black scholes model and be cashed out by writing same expiration or earlier expiration call. imho, that's a double rip off to old investors since they issued shares below book value and offered a discount on top of that. as a comparison, csiq and jks did secondary way above book value and not much discount to maket price at the issuance.

[Guest Rommel]

Josh - " imho, that's a double rip off to old investors".  Please read about the CFO below.

 

BTW, derivative play is nothing new for JASO. Back in 2007-2008 they had derivatives that would show up on the balance sheet/income statement. I am now thinking a rogue CFO here.

 

They are also the company that gave Lehman $100M on an IOU and lost it. I am wondering if JASO has the same CFO for last 5-6 years. I would fire him immediately if he is the same dude. 

[sunnysky 905]

Rommel, please don't confuse stuff. Warrants being bad or not has nothing to do with whether JASO turns a profit in Q4 or not. The latter is obviously good.

 

Explo, I'm not sure how JASO accounts for warrants in their BS. If they are consistent in reporting, then I see the warrants together was worth about $30 M altogether at the end of Q3: $11 M for Series A and $19 M for Series B. I guess you combined current and non-current?

[explo 648]

JASO hoped to get $200M out of this offering, almost 50% of their market cap at the time. This deal is already priced into the stock and I am sure the investor is using the warrants to maximize their trading in JASO. That is what a hedgie does. There is nothing we can do about the deal JASO made for the warrants and we bought into it after the deal was announced so are we saying that we did not understand the deal then but do now and it is not good?

 

However, I am confident that JASO has turned a profit in Q4. That will be good for the investors any way we look at it.

 

No I think JASO is a great bargain here. During the deal I bought JKS in low teens instead of JASO at high single digits though. Now after showing operational strength in Q3 I buy JASO still in high single digits instead of JKS at mid 30's.

 

I'm trying to understand the deal better. It can't be as bad as I assume, which still makes me think JASO is a screaming buy, and then JASO would be an even bigger screaming buy.

 

Sunnysky pointed out that they could sell the 3m ADS without discount, which was good.

 

Abc pointed out that actual dilution will likely be much lower than max due to exercise restriction.

 

I found some other rules like interlinked warrant exercise rights (if A-2 and A-3 are not execised only half B can be execised etc.) and the cashless execise option.

 

I also noted that a big 50m liability was planted in Q3 BS, which will go away as warrants expire and should reverse to GAAP profits in the order of $1 to make them look extra profitable in Q4 and 2014.

 

I'm still not sure if it was a win-win for new investor and old shareholders. For new shareholders buying stock today I see big wins though.

[Guest joshchang]

rommel, yeah, seems their cfo was not able to strike a better deal for them. not sure if it's the same cfo though. the company was in nice shape and was not financially stressed at all. i was puzzled why they gave up shares at such a discount as if they really need the money to do some big move.

[explo 648]

Explo, I'm not sure how JASO accounts for warrants in their BS. If they are consistent in reporting, then I see the warrants together was worth about $30 M altogether: $11 M for Series A and $19 M for Series B. I guess you combined current and non-current?

 

I see 14m current (should be the 7.6m @ $9.43 series A-1, A-2 and A3) and 36m non-current (should be the 10.2m @ $10.90 series B).

 

I wish they would do cash flow analysis in quarterly basis. The 20-F will be a very interesting read.

 

I might sound negative. I'm not. I'm more fascinated by the complexity of this offering and the accounting for it and curious about how it really works.

[sunnysky 905]

Abc pointed out that actual dilution will likely be much lower than max due to exercise restriction.

 

I found some other rules like interlinked warrant exercise rights (if A-2 and A-3 are not execised only half B can be execised etc.) and the cashless execise option.

 

Yes, a huge positive is it is true. Obviously, these restrictions have not being factored into their financial reporting.

[explo 648]

rommel, yeah, seems their cfo was not able to strike a better deal for them. not sure if it's the same cfo though. the company was in nice shape and was not financially stressed at all. i was puzzled why they gave up shares at such a discount as if they really need the money to do some big move.

 

That's what is a bit puzzling to me too. They had more than 700m in equity. They gave away A LOT of warrants to raise 24m more equity. It is hard to make sense of it, since they were not in a position where they had to do any issue that was not valuable to shareholders. That's why I'm searching for this value. If there is none, it just seems plain stupid or corrupt and I don't believe that. If SOL or Jinko did this it would be different as they were running low on equity and more desparate to increase it and might be forced to take a bad deal. I don't see JA taking a bad deal to raise 24m equity they did not really need.

[sunnysky 905]

I also noted that a big planted 50m liability was planted in Q3 BS, which will go away as warrants expire and should reverse to GAAP profits in the order of $1 to make them look extra profitable in Q4 and 2014.

 

Again, I though you wouldn't care the extra "bonus" as I've mentioned on two occasions. I think it will be a huge psychological boost - when investors see the EPS, their first reaction would be "Wow" .

[Guest joshchang]

That's what is a bit puzzling to me too. They had more than 700m in equity. They gave away A LOT of warrants to raise 24m more equity. It is hard to make sense of it, since they were not in a position where they had to do any issue that was not valuable to shareholders. That's why I'm searching for this value. If there is none, it just seems plain stupid or corrupt and I don't believe that. If SOL or Jinko did this it would be different as they were running low on equity and more desparate to increase it and might be forced to take a bad deal. I don't see JA taking a bad deal to raise 24m equity they did not really need.

there might be hidden benefit or not. one explanation is they are conservative management and they felt unsafe after paying out that cb and wanted to get back to similar cash level.