Taipei, Friday, April 25, 2014 09:03 (GMT+8)
Incredible: Suntech fails to pay back loans but share price increases by 4%
Jackie Chang, DIGITIMES, Taipei [Monday 18 March 2013]

There is a Chinese saying: observing flowers in the fog. It simply means people aren't seeing things clearly. This is how I feel about the recent events unfolding at Suntech, a China-based large-size solar firm.

Seriously? On Friday, March 15, 2013, Suntech Power Holdings did not make the due payment of US$541 million on convertible bonds. Here comes the surprise: the firm's share price on the New York Stock Exchange (NYSE) went up by 4.48% that day. This may be the result of investor confidence being boosted by an article in the New York Times, published on March 13, 2013, which said that Wuxi Guolian, a holding company owned by the municipal government of Wuxi, China, confirmed a deal to buy Suntech (entirely or partially). However, the person that confirmed this from Wuxi Guolian declined to identify herself, said the report. The article was published on March 13, wouldn't it be more reasonable for the share price to surge, let's say, on March 14? Also, there may be a pending lawsuit against Suntech for not paying back the loan, according to a report by the Sydney Morning Herald.

This is not the only bizarre thing. Another China-based solar giant that has been facing financial problems for more than a year, LDK, saw its share price rose by 13.60% on March 15. On January 21, 2013, LDK signed an agreement with a China-based investment company, Fulai Investment, for the latter to purchase 17 million of newly issued ordinary shares of LDK, or 12% of LDK's total shares. The total investment was around US$31 million, according to a company press release published on January 22, 2013. However, the firm has not issued any quarterly financial reports after June 26, 2012.

I am not a stock investor; nor do I know the game of the financial market, so I guess investors thought if Suntech paid the debt, then everything would be fine. And if Suntech did not pay the debt, it means the acquisition would go ahead and again, there would be nothing to worry about even though by becoming a state-owned enterprise, Suntech's current inefficient business model would continue. I thought it would be logical for the share price of Suntech to fall on the day the firm failed to pay back on its US$541 million of loans. If one day I fail to pay back my mortgage when it is due, I hope there will be some people (especially the bank I am owing money to) who still have faith in me and think that I did not pay back the loan because I have a bankroller backing me up, and give me more money to spend. That would be wonderful!