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18 hours ago, Mark said:

Sorry, I should have given a reference.  That's from CSIQ's investor relations:  

SPI just ended. There was talk coming out of it that people were getting ahead of themselves with China volume growth and some sense of sell the news.

OK, thanks.  That doesn't sound all that alarming, though.  And there are still no negative headlines.

If prices stabilize here, and rebound in a couple of days, I'd say this was just another of those random fluctuations we've seen so often before.  If they continue to crater, you may be on to something.

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5 minutes ago, solarpete said:

OK, thanks.  That doesn't sound all that alarming, though.  And there are still no negative headlines.

If prices stabilize here, and rebound in a couple of days, I'd say this was just another of those random fluctuations we've seen so often before.  If they continue to crater, you may be on to something.

CSIQ doesn't have a ton of China exposure, so there's that... but given what FSLR is also doing right now, looks like some big fish caught a Chinese cold again and we're re-pricing for lower global ASPs.  The Tiawan news today was nice, they seem to be ready to suck up a lot of modules pretty quick over the next year.  I sold half my position today.  Took pretty major losses.  Still up substantially on the year, but the highs never feel as high as the lows do low.  I just hope I'm not wishing next week that I'd sold the other half too given what happened last time China caught a cold.

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1 hour ago, Mark said:

Took pretty major losses.  Still up substantially on the year,

You can never go wrong taking a profit.  NO ONE can time every high and low to buy and sell at exactly the right time.  All that matters is that you're making money overall.

China will be just fine in the long term.  They've invested too much into their solar industry already, and they need them too much to solve their air pollution problem, to abandon them.  Any slowdowns now are just their attempts to force these companies into SUSTAINABLE business models, which is healthy for the industry in the long term.

I like always having options for my investments:  if prices drop, I have buying power to take advantage, and if they rise, I have sufficient appreciated positions I can sell some (not all--in case they rise further!) to again take advantage, and replenish my buying power.  If prices do drop further next week, look at it as an opportunity to reinvest the funds you freed up by taking a profit this week.

All the best!

Solarpete 

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I think JKS and DQ is dangerous to touch now, considering this: " Trump administration officials are considering ways to limit U.S. investors’ portfolio flows into China, including delisting Chinese companies from American stock exchanges and putting a limit on U.S. government pension funds’ exposure to the Chinese market."

https://www.cnbc.com/2019/09/27/white-house-deliberates-block-on-all-us-investments-in-china.html

Canadian Solar was smart to become Canadian. 🙂

Edited by MVA
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WOW!!  I certainly hadn't heard anything about THAT!!

Let's hope the Administration doesn't actually have the POWER to do that....

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20 minutes ago, solarpete said:

WOW!!  I certainly hadn't heard anything about THAT!!

Let's hope the Administration doesn't actually have the POWER to do that....

Every day gets more and more insane.  I too wondered about their power to do that.  I also wonder how many times Trump tips off his kids and friends to his next stupid idea that will tank the market, so they can short, ride down and then go long and make money on both ends of the tweets.  All the while waiting to further trash the market to get interest rates down so he can benefit from that too.  

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So which analyst will jump in here and say the selloff is overdone and China demand will be picked up by other regions? Someone? Anyone? 

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1 hour ago, Mark said:

China demand will be picked up by other regions?

I saw exactly that quote a week or so ago.  Not sure if it was in an article linked in a post here or something I found on Yahoo Finance, though.

The Orange Clown's threat of delisting Chinese companies is a totally new factor, though.  Without it, as of this morning, the entire sector was stable, and it looked like the selloff was done for now.  With it, who knows where this now goes?  The market could shrug it off as a negotiating tactic, or it could drop these stocks off a cliff.

The sooner we see the next round of earnings, the better.  They don't have to be stellar--just proof that everything is still moving along more or less under control.

And I imagine trying to delist these companies will be easier said than done.  Delisting means investors have to sell their stock.  To whom?  The companies aren't going to buy it back (at least not the solars)--they don't have the capital.  (That's why they sold their stock on the US market in the first place--to raise capital.)  So it gets declared worthless??  That would affect millions of investors, including large hedge funds, and wipe away hundreds of billions in value (I'm speaking of Chinese stocks in general now, not just Chinese solars).  It would make the losses already suffered by US farmers because of this idiotic trade war look like pittances.  Does the US President really have the power to force the financial markets to do that?  Does Congress have no means of stopping it?  I would think even Republican Senators and Congressmen would get an earful from their constituents on that.

I'm sure this will continue to be in the news, so we shall see.  In the meantime, though, in the face of this new and grave uncertainty, I don't look for a significant rebound until this issue is resolved.  So I'll settle for at least not freefalling further.

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36 minutes ago, solarpete said:

I saw exactly that quote a week or so ago.  Not sure if it was in an article linked in a post here or something I found on Yahoo Finance, though.

The Orange Clown's threat of delisting Chinese companies is a totally new factor, though.  Without it, as of this morning, the entire sector was stable, and it looked like the selloff was done for now.  With it, who knows where this now goes?  The market could shrug it off as a negotiating tactic, or it could drop these stocks off a cliff.

The sooner we see the next round of earnings, the better.  They don't have to be stellar--just proof that everything is still moving along more or less under control.

And I imagine trying to delist these companies will be easier said than done.  Delisting means investors have to sell their stock.  To whom?  The companies aren't going to buy it back (at least not the solars)--they don't have the capital.  (That's why they sold their stock on the US market in the first place--to raise capital.)  So it gets declared worthless??  That would affect millions of investors, including large hedge funds, and wipe away hundreds of billions in value (I'm speaking of Chinese stocks in general now, not just Chinese solars).  It would make the losses already suffered by US farmers because of this idiotic trade war look like pittances.  Does the US President really have the power to force the financial markets to do that?  Does Congress have no means of stopping it?  I would think even Republican Senators and Congressmen would get an earful from their constituents on that.

I'm sure this will continue to be in the news, so we shall see.  In the meantime, though, in the face of this new and grave uncertainty, I don't look for a significant rebound until this issue is resolved.  So I'll settle for at least not freefalling further.

If delisting was the reason for today's sale off, then why FSLR and SPWR dropped the most? Only JKS, SOL and DQ are main candidates for this stupidity, CSIQ is Canadian company, with production sites in many countries (besides China). And Qu is Canadian citizen. As per cnbc comments today, delisting is a total BS, it is impossible to accomplish. They can prohibit pension funds to invest in Chinese companies, and that is all. I still think a number of factors played this week here: Uncertainty about China Q4, End of Q3, and Market repricing, because major indexes reached the new highs last week. 

Edited by MVA
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On 9/27/2019 at 4:27 PM, solarpete said:

Once again you're only looking at half of the equation.  Why would the ASP drop to that level?  Because companies lower their price.  And why would they do that?  Because their COSTS drop as well.  Looking at the other posts here, those costs can drop to below $4/kg.

Since you're good at crunching numbers, let me toss the question back to you with that added condition:  what do you think would happen to Daqo if its ASP dropped to $7/kg AND their costs dropped to $4/kg?

Why not discuss their earnings if they manage to get costs down to zero?

They guided costs of $6.8/kg once phase 4A is ramped at the end of 2019.  If they sell for $7 that means horrendous losses.

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Watch out FSLR, double sided solar modules apparently are  within a half cent to make as single sided Perc modules and the line conversions for single to double are quite easy to do. You can start to expect an ASP in the very low .30's down to $0.25 in the near future.

 

http://guangfu.bjx.com.cn/news/20190929/1010510.shtml

 

WoodMac's research found that the difference in production costs between double-sided single-crystal PERC components and their single-sided equivalents is now as low as $0.005. Most importantly, it is easier to adjust the production line for producing single-sided components to a two-sided assembly line, and the certainty of supply to meet potential market demands is guaranteed.

The US double-sided market will also achieve significant growth due to the exemption of 201 solar import tariffs for double-sided products. Analysts pointed out: "Because of the exemption, double-sided solar modules manufactured in Southeast Asian countries will have a significant price advantage because they do not have to bear any kind of import tariffs."

Switching to a double-sided system can save a lot of money for US PV project developers. If the cost of a component is 0.25-0.35 US dollars / watt, if you replace it with a double-sided component, you can save 0.06-0.09 US dollars / watt. For developers, the full price is about $ 1 / W-DC, and the overall system price cuts are large.

 

 

 

 

 

 

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On 9/28/2019 at 8:45 AM, Klothilde said:

Why not discuss their earnings if they manage to get costs down to zero?

Why not discuss their earnings if ASPs rise to $10?

YOU'RE the one who started the "what-if" game.  But there were TWO pieces of news related to changing trends, one for ASPs, and one for costs.  Ignoring one while accepting the other at face value is simply logically fallacious--and should be pointed out as such.

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2 hours ago, solarpete said:

Why not discuss their earnings if ASPs rise to $10?

YOU'RE the one who started the "what-if" game.  But there were TWO pieces of news related to changing trends, one for ASPs, and one for costs.  Ignoring one while accepting the other at face value is simply logically fallacious--and should be pointed out as such.

You are distorting the meaning of my post.  Go back and you'll see that I expressed doubt as to the numbers in the article linked by SCSolar having any practical relevance.  And I implied that it is good that they don't have any practical relevance because Daqo would be in trouble if they had an ASP of $7/kg.

Get it?

Then you throw in those $4/kg into the discussion implying this should enter the equation as a possible cost position for Daqo next year.

If you'd bothered to read the article linked by SCSolar you'd quickly notice that the $4/kg do not apply to Daqo.  The article says that reducing the electricity rate is one of the major cost reduction levers, and that if you moved a plant to a low-electricity region you could reduce overall costs down to 30000yuan/ton.

Guess what:  Daqo just completed a state-of-the-art plant in the region with the lowest electricity cost and the production cost of this new plant will be $6/kg when ramped.  So the $4/kg suggested by the article is baloney or it just doesn't apply to Daqo.

I personally think the $4/kg is baloney as neither Daqo nor Tongwei have hit those costs with their new plants.  Tongwei has indicated costs of 40000 yuan/ton for the new plants:
https://solarpvinvestor.com/topic/2-daqo-dq/page/20/?tab=comments#comment-98216

So if it's fine with you let's do away both with the $7/kg ASP and the $4/kg cost discussion cuz it's just a waste of time, shall we?  Let's just take their cost guidance of $6.8/kg and try to figure out where ASP could be, shall we?

I take it you threw in the $10/kg ASP without much thought, is that right?  Or what makes you think prices will go up?

 

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3 hours ago, Klothilde said:

So if it's fine with you let's do away both with the $7/kg ASP and the $4/kg cost discussion cuz it's just a waste of time, shall we?  Let's just take their cost guidance of $6.8/kg and try to figure out where ASP could be, shall we?

I take it you threw in the $10/kg ASP without much thought, is that right?  Or what makes you think prices will go up?

That is indeed fine with me.  Again, I wasn't the one who started this speculation.  But I don't like arguments that only tell half the story.  Perhaps today's political climate has heightened my sensitivity to such tactics.  In the past, I might have ignored this entire thread as being too speculative to rise to a significant level of importance.  But nowadays I have to put up with these kinds of shoddy arguments in the news on a daily basis.  On this forum, at least, I can and will push back.

Yes, the $10 ASP figure was just a sarcastic way of pointing out that you can reach any conclusion you want if you start with a sufficiently ludicrous underlying assumption.  But it's incorrect to assume DQ's costs will remain at the $6.8 level.  I am confident they will continue to reduce their costs, through a variety of mechanisms, along with the rest of the industry.  What level that eventually reaches I do not know--but given their past performance, I am again confident they will be able to reduce costs at least as fast as they have to reduce prices.  Again, that is based on their past performance, where they proved their ability to do just that.

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5 hours ago, Klothilde said:

Y

 

If you'd bothered to read the article linked by SCSolar you'd quickly notice that the $4/kg do not apply to Daqo.  The article says that reducing the electricity rate is one of the major cost reduction levers, and that if you moved a plant to a low-electricity region you could reduce overall costs down to 30000yuan/ton.

Guess what:  Daqo just completed a state-of-the-art plant in the region with the lowest electricity cost and the production cost of this new plant will be $6/kg when ramped.  So the $4/kg suggested by the article is baloney or it just doesn't apply to Daqo.

I personally think the $4/kg is baloney as neither Daqo nor Tongwei have hit those costs with their new plants.  Tongwei has indicated costs of 40000 yuan/ton for the new plants:

 

 

Or the $4 cost is accurate for a 2020 year end.

Here is an NREL report (table 6) from 2018 that suggests the cost to produce 1 Kg of Poly is $3.60 based on 0.045/Kwhr.

 

https://www.nrel.gov/docs/fy19osti/72134.pdf

 

The $3.60 would not include the depreciation of reactors.  It also does not consider the power plants depreciation or cost to operate.  If you look at the $0.02Rmb that DQ is getting vs the $0.045 USD NREL is using, they will save $0.50 on energy for the reactors based on the Nrel document.  That puts the cost to produce down to  $3.10 for Silicon. This is without lower labor costs and other costs from the depreciated RMB and other costs being lowered. The RMB depreciation should in itself lower costs by $0.36 from the NREL slide. That puts cash costs in theory at $2.75/KG  based on the NREL slides. That is before any other cost savings on say materials.

Add  in depreciations and another electric costs and you can see that the targets set forth for the end of 2020 is not that far off the research article I posted.

But you do have your numbers and they appear to founded in past comments and targets.  I would like to see what the real target costs are longer term. Kind of like FSLR costs you know suggesting Series 6 is at around $0.21, but now you seem to suggest they could be as low as $0.15/Watt. 

We all have been investing in solar long enough to know that target costs which were stated for 3 years out have always been surpassed and usually by a year or 2. So why would one presume that the DQ costs analysis ran in 2016 and stated in la 2017 early 2018 are still valid for a 2020 year end projection?

 

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12 hours ago, SCSolar said:

Here is an NREL report (table 6) from 2018 that suggests the cost to produce 1 Kg of Poly is $3.60 based on 0.045/Kwhr...

Those are only the costs of the vapor deposition step and not of the entire process including trichlorisilane production.  Full costs are shown in figure 7, with a China location running at $11/kg production cost and $8/kg cash cost.  Thanks NREL but no thanks.

Here's a broker report that puts GCL's latest Xinjiang plant at 50 yuan/kg:
https://img3.gelonghui.com/pdf201811/pdf20181128175433546.pdf

 

12 hours ago, SCSolar said:

But you do have your numbers and they appear to founded in past comments and targets.  I would like to see what the real target costs are longer term. Kind of like FSLR costs you know suggesting Series 6 is at around $0.21, but now you seem to suggest they could be as low as $0.15/Watt. 

We all have been investing in solar long enough to know that target costs which were stated for 3 years out have always been surpassed and usually by a year or 2. So why would one presume that the DQ costs analysis ran in 2016 and stated in la 2017 early 2018 are still valid for a 2020 year end projection?

I think once you move your poly plant to a low-cost location like Xinjiang then the room for further cost reduction is reduced significantly.  You may squeeze a few percent more energy efficiency out of a new design but that's it.  Or how do you envision a further 30% cost reduction within 12 months?  This is not manufacturing where you can apply 1000s of small actions for continuous cost reduction.  Once a chemical process plant is designed and built your hands are pretty much tied cause your pipes and reactors are all specified for a given flow, temperature, pressure, etc. 

As far as FSLR goes I see them hitting 21 cents in Q4 (hopefully) and then going down to 15 cents within a year or two.

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18 hours ago, solarpete said:

...What level that eventually reaches I do not know--but given their past performance, I am again confident they will be able to reduce costs at least as fast as they have to reduce prices.  Again, that is based on their past performance, where they proved their ability to do just that.

Well if the above is true tell me why their EPS has plummeted over the last two years and why they are posting losses nowadays?

Yahoo tells me:
EPS in 2017 was $8.5
EPS in 2018 was $2.9
EPS ttm was -$0.19

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1 hour ago, Klothilde said:

Yahoo tells me:
EPS in 2017 was $8.5
EPS in 2018 was $2.9
EPS ttm was -$0.19

Simple:  Yahoo is wrong.  I have no idea where they get their TTM figure from.  The quarterly figures shown on their DQ chart are + 0.16, + 0.81, +1.16, and +0.32 for the last 4 quarters.  All, I might add, handsomely beating expectations as well.

So yes, earnings did come down significantly from 2017.  But they did NOT disappear.  Even with all the headwinds over the past few years, they are still solidly profitable.

Eventually, ASPs will stabilize.  The question is, will DQ still be profitable at whatever level that will be?  So far, I see no reason to doubt that.

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16 minutes ago, solarpete said:

Simple:  Yahoo is wrong.  I have no idea where they get their TTM figure from.  The quarterly figures shown on their DQ chart are + 0.16, + 0.81, +1.16, and +0.32 for the last 4 quarters.  All, I might add, handsomely beating expectations as well.

So yes, earnings did come down significantly from 2017.  But they did NOT disappear.  Even with all the headwinds over the past few years, they are still solidly profitable.

Eventually, ASPs will stabilize.  The question is, will DQ still be profitable at whatever level that will be?  So far, I see no reason to doubt that.

In the meantime, guys, if you didn't notice, solar stocks just collapsing... 8 days in a row. :-))))

And, surprisingly, nobody talks about it here...

Edited by MVA

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18 minutes ago, solarpete said:

Simple:  Yahoo is wrong.

You are comparing GAAP to Non-GAAP earnings. The big question is whether the non-GAAP adjustments are valid or a farce like how SunPower does things.

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13 minutes ago, Luz del Norte said:

You are comparing GAAP to Non-GAAP earnings. The big question is whether the non-GAAP adjustments are valid or a farce like how SunPower does things.

Is that the reason for the difference?  I don't know.  But even if so, EVERYONE reports non-GAAP adjustments.  I have seen NO discussion of any financial shenanigans involving DQ.  In the absence of evidence to the contrary, I will take their financial reports at face value.  

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22 minutes ago, MVA said:

In the meantime, guys, if you didn't notice, solar stocks just collapsing... 8 days in a row. :-))))

And, surprisingly, nobody talks about it here...

I've noticed--including FSLR, I might add.

I'm just not sure what to make of it.  Solar stocks have experienced similar falls before, for no apparent reason.  Perhaps Chinese demand is indeed not living up to expectations.  But then why is FSLR also falling?  ENPH certainly shot up too far, too fast after last earnings.  But to now fall back to a level BELOW that before those earnings were announced is also completely overdone.

Whatever the cause, I've shut down my trading for now, until we hit a bottom (wherever that will be) and start rebounding.

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17 minutes ago, solarpete said:

I've noticed--including FSLR, I might add.

I'm just not sure what to make of it.  Solar stocks have experienced similar falls before, for no apparent reason.  Perhaps Chinese demand is indeed not living up to expectations.  But then why is FSLR also falling?  ENPH certainly shot up too far, too fast after last earnings.  But to now fall back to a level BELOW that before those earnings were announced is also completely overdone.

Whatever the cause, I've shut down my trading for now, until we hit a bottom (wherever that will be) and start rebounding.

China demand isn't there and the electricity rate adjustment by China won't help either.  FSLR would be falling because they're gonna have to compete in a lower ASP environment... well, that's the market theory, despite being sold out for the next couple years.  I sold off my remaining CSIQ shares today and am also going to the sidelines.  I'll trade a small hand if i see an opportunity (did once today already), but no holding for me.  Disgusted, because I think they're positioned best of any of them right now.  One thing being totally ignored is EU solar growth and Tiawan's ambitions, not to mention other countries which will soak up a lot of that China shortfall.  But with solars and Trump/trade issues, who in their right mind would buy right now is how I see it.  We'll need one of the puppets to come out and say selloff is overdone and global demand will make up for China.  I don't think this selloff is totally justified, but I get why they're doing it.  Wall Street loves trashing the solars.  Qu would be best off taking this private now and listing in China.  Oh and we're in a manufacturing recession.  And Trump seems fine with burning down the castle to make a point or get his family lower interest rates.

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2 hours ago, solarpete said:

Is that the reason for the difference?  I don't know.  But even if so, EVERYONE reports non-GAAP adjustments.  I have seen NO discussion of any financial shenanigans involving DQ.  In the absence of evidence to the contrary, I will take their financial reports at face value.  

Loss per basic American Depository Share (ADS) of $1.39 in Q3 2018
https://www.prnewswire.com/news-releases/daqo-new-energy-announces-unaudited-third-quarter-2018-results-300748997.html

Loss per basic ADS was $0.16 in Q2 2019
https://www.prnewswire.com/news-releases/daqo-new-energy-announces-unaudited-second-quarter-2019-results-300901470.html

Hmm...  wasn't Daqo supposed to remain profitable forever?

And keep in mind that Non-GAAP is just used to spice up numbers for investors.  All the SEC cares about is GAAP and it's the GAAP net income that is booked under retained earnings on the balance sheet.

I think your theory of Daqo being immune to losses because it is one of the lowest cost producers is simply flawed.  When gluts get nasty in a commodity business they can sometimes wipe out earnings for ALL the companies in the industry including the lowest cost producers.  We've seen it happening during the 2011/2012 PV market downturn when even the CN module companies with the lowest cost posted several quarters in a row of losses.  Don't you remember?

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I am comfortable using non-GAAP numbers, as long as there is no indication they're fraudulent.  From personal experience filling out my tax returns, I know that a given "standard" number does not BEGIN to tell my financial situation--it's all about the adjustments to that number.  I suspect non-GAAP is closer to actual cash flow, which is the critical metric when you're in a difficult but temporary environment and you're just trying to hang on until better times arrive.  (Hmm... sounds like my trading at the moment!)

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On 9/30/2019 at 5:17 PM, Mark said:

Eager to hear your thoughts on all this China news lately, Klothilde.

Well I tend to side with the GCL guy, i.e. Imo China installations in Q4 will probably come in way below expectations and installations over the next few years will be reduced.  the news on government trying to get electricity rates down also simply means less funds for legacy and new solar plants and longer time to get grid parity dynamics in motion.

Globally PV will probably grow at 5-10% per year.  Since capacities at all steps are being expanded at much faster rates I expect oversupply to increase and margins to drop.  In the short term (i.e. Q3-Q4) JKS and CSIQ may actually benefit from cheaper upstream component prices but going into Q1 and Q2 their margins will probably shrink again. 

DQ's ASP and margin will be hit as well since we have quite a lot of new polysilicon supply coming online into Q1.  Further I speculate China (industry and government) is now ready to price OCI and Wacker out of the Chinese market by lowering prices in 2020 and lending financial assistance to key players to withstand a string of unprofitable quarters.  I see blood in my crystal ball.

Regarding the delisting thing this may be a good opportunity (excuse) for JKS to finally crash the stock and take the company private.  Only reason why it hasn't happened yet is cuz they needed the yearly secondaries to fund their expansion.

Some of my thoughts...

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