Reverse stock splits are rarely a good sign for a company. Today Yingli Green Energy announced that it will change the ratio of its American Depositary Shares to ordinary stock, from 1:1 to 1:10, effective December 28. This will have the same effect as a 1:10 reverse stock split.
Yingli’s stock has been below US$1 per share on the New York Stock Exchange (NYSE) since early July, following reports of a halt in production and several quarters of disappointing financial results. In Q3 results released earlier this month, the company reported a substantial fall in revenues and a utilization rate of only 70%.
A central problem is Yingli’s heavy debt burden. The company has severe debt problems and based on their recent financials their revenue growth is decreasing while the solar industry is booming, Mercom Capital CEO Raj Prabhu told pv magazine. That is not a good place to be.
This should automatically raise the value of Yingli’s stock, but there is no guarantee that prices will not fall again. If the company can’t keep its stock above the $1 per share threshold, it will be de-listed, per NYSE rules.
The last year has seen a big fall for Yingli, which was the world’s largest PV module maker as recently as 2013. This followed the collapse of the previous leader, Suntech, and the record in recent years is that this position is not held for long.