Friday, May 22, 2015

Hanergy: let there be no doubt

Background: Hanergy is a large cap solar cell manufacturer that has been suspended on the Hong Kong market. The biggest shareholder supposedly lost USD14 billion in one day

Now that Hanergy has been suspended I can let these out.

I went to visit Hanergy's main factory in China about a six weeks ago. It was almost entirely silent. There was essentially no production of solar cells at all and the accounts that suggest significant production and sales are entirely fraudulent.

There was some evidence that someone was exploring starting production - and I will get to that - but the factory was almost entirely idle.

Here are a few photos.

This is the plant. There were almost no cars despite a vast car park. All gates except one were locked.

There was a single truck being loaded with solar cells - so there was *some* production. However this truck was being loaded when we arrived and still there when we left two hours later. This plant if it had any production at all had it only a trial basis. The accounts that suggest substantial production are false.

This is another photograph of the main drive to the plant. One car was parked. There was no movement.

This I found particularly bizarre. There were solar cells set up around the plant Some of them were set up in triangle-patterns. This is the only place I have ever seen solar cells set up so that they are not orientated towards the sun.

I walked around the enormous plant. Not a truck went by and the only people we saw except at the side were the gardeners. (There were several of them - and we asked them if it ever got any busier. They confirmed it did not.)

However on the side there was a shaded area with some motorbikes parked - which suggest that the plant is not entirely idle. Just almost.

Strangely two white guys walked out of the plant. I think they were Americans trying to sell some technology - maybe sales guys from AMAT - but I am only guessing. I tried to signal for them to come over but they did not.

There has been much press that compares Hanergy to other solar companies and suggests there may be disruptions in the market for panels. Garbage I say. The right comparison is Sino Forest or Longtop Financial Technology.

Hanergy barely existed.


Disclosure that will annoy my clients. Despite sitting on these we were not short Hanergy. Too much squeeze risk for my liking.


Anonymous said...


Why spend your time figuring out that a company "barely exists" if you're not going to take advantage of that information? Despite the risk of a squeeze, couldn't you have had at least a small position on?

Anonymous said...

Thanks for sharing. There is tremendous value in unannounced site visits.

Anonymous said...

"Despite sitting on these we were not short Hanergy. Too much squeeze risk for my liking."

Wow, major missed opportunity there. Doesn't appropriate sizing take care of squeeze risk? Couldn't you buy puts on this? Just curious - thanks for posting the pics.

Multidimension Dot said...

I thought it was so obvious and consensus reached, if you just look at their sales, AR, profit margin, low float, and related transactions. Not even worth one-site visiting.

The company is controlled by the family and friends, they definitely need a higher price for stocks so they would collateralize and finance.

With that said, the stock might go up when halt lifted

John Hempton said...

I realize the stock could do weird things. No position.

Anonymous said...

No options listed on this name

Anonymous said...

I read your article and told my chinese friends. A reporter from (chinese cnbc) asked me to forward to her. I gave her your email:) I think they had a recent report accusing Hanergy too

Unknown said...

Good research. Thanks John.

HZ said...

people dont realize how many people were burned shorting this stock. everyone knew it would blow up some day. the LIMITED borrow i could get from my prime brokers was at a rate between 25-30%. I too had no position -- seeing how many people were hurt shorting too early + 25% borrow it could easily turn into a -50% position just cause.

Like lets gowex this stock could be halted for 1 year and who knows if primes will charge you borrow while the shares are would probably have to collapse the position OTC at some price to avoid this.

Anonymous said...

Nice work, John. One point to note, however is that Hanergy's main factory is in Sichuan Province, a placed called Shuangliu near Chengdu. Did you visit this factory? From the pics. it seems like this is in Haikou, Hainan. Your thesis surely still carries weight, but I wonder about the other factories.

Anonymous said...

You are obviously wrong and your research shows obvious lack of lateral thinking and creativity.

The factory is staffed by Oompa Loompas.

Anonymous said...

"Now that Hanergy has been suspended I can let these out."

Useless work... definite bragging John. It is one thing to investigate, another to say I knew it AFTER the event.

You have used us to better than than this John.

Anonymous said...

Hmm Anonymous does raise a possible point. The FT article of Jan 29 mentions "nine factories"
\\the FT has uncovered that at Hanergy Group’s nine factories there is “a large gap between the reported revenues up to 2012 and the money the factories spent buying equipment from HTF.” More recent documents were not available. HTF’s Mr Dai said that 2013 and 2014 should show an improvement in sales.
Shipments of Hanergy product have been difficult to track. Speaking to pv magazine late last year, the IHS analyst said that it is “extremely difficult for anyone outside of the company to predict what Hanergy will do next.”//
PVmag 30th Jan, quoting the FT of Jan 29th

Anonymous said...

With a triangle module pattern of rows running north/south you lose some production but you get a smoother production profile.

Anonymous said...

Re Anonymous's comment, "Useless work": wow, please direct us to something you have posted on the Internet for others' benefit which is useful. My hunch is that like other Internet trolls you find it a lot easier to criticize others than to provide useful information yourself.

As for why John didn't post this piece bofore, I'll bet that he still had not made a final decision about whether to short the stock and wanted to keep his options open. People don't realize how difficult short-selling is: not only do you have to make a decision about whether something is overvalued, you also have to decide whether the neg rebate will take all your profits and whether a short squeeze will cause you to lose money on protective covers even if you are right fundamentally. On longs you only have to get the fundamentals right. With shorts you have three chances to be wrong.

I too looked at Hanergy and considered shorting it (as well as one of the Goldin companies). I also decided against it, though for a different reason from John. While I thought the company was a fraud, it looked to me like the kind of fraud which could go on for many years in China, since even John's concerns could have been quickly allayed by real orders from Hanergy Holding, which in turn could have been financed indirectly by stock sales or loans using Hanergy Thin Film stock. I was the person primarily responsible for busting a similar fraud in the US (same structure though a smaller company), but I felt that in China (even in Hong Kong) the regulatory scrutiny which you can depend on in the US might be absent. And, in fact, the investment arm of China's foreign exchange regulator just bought a big stake in Hanergy Thin Film, so my concerns were not entirely groundless.

Unlike you, Mr. Anonymous, I was "hurt" by John's inaction, since I am one of the largest investors in John's and Simon's fund. However, I am not the least bit distressed. Exercising this kind of judgment is exactly what we pay John and Simon for.

E.J. Dreiks said...

A fluffy interview with the honorable Chairman Li just out on the Chinese domestic web. He laughs in the reporters face when asked if he's being investigated by the HK regulators and says it's "impossible." Never fear, he says, the production lines are running full capacity, overtime even, with plans for rapid expansion.

Here's the Reuters short write-up on it:

Anonymous said...


It would be good to have you posting stuff like you used to on many China names and in depth commentaries on First Solar. I found it very valuable.

You have moved on perhaps, but I am sure many of us who track your blog posts started reading you for your in depth analyses.

Anonymous said...

For anyone who has work with or for Hanergy, this comes as no surprise whatsoever.

kl said...

the white guys said...

That's the Heyuan factory.

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