GCL-Poly cranks up its share repurchase program again

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Chinese polysilicon giant GCL-Poly has been pressing ahead with a share buyback program against the backdrop of a tumbling share price since the abrupt decision by the Chinese government at the end of May to rein in PV payments.

In an update to the Hong Kong Stock Exchange at lunchtime today, GCL-Poly Energy Holdings Limited revealed details of the scale of its share repurchasing activity.

The Cayman Islands and Hong Kong registered poly manufacturer paused its buyback activity after two days of heavy repurchasing late last month but resumed yesterday by taking back 15 million of its 18.6 billion shares, at a price of HK$0.68/share (US$0.087/share), according to Bloomberg stock price figures.

And that activity continued this morning as GCL repurchased a further slab of 10 million shares at the same price.

Although bosses of the global polysilicon big beast may feel the share price has been undervalued by the reaction of the markets to the Chinese government’s about-turn – thereby offering a good point to buy back its stock – analysts who are predicting huge production overcapacity in China and a related plummet in the price of raw materials, will consider the other side of the coin.

If GCL fears the global poly market is about to get a whole lot worse before things improve, buying back stock – and then putting the brakes on the buyback program – is a less painful way to reduce outgoings than cutting the dividend, with the latter course’s attendant risk of routing already spooked investors.

According to Bloomberg’s figures, GCL stock reached a 12-month peak of HK$1.54/share on November 15. The stock was at HK$0.86/share on May 31, when the Beijing authorities stunned the solar world by announcing an intent to radically curtail PV in the world’s largest market, and although it recovered to HK$0.87 the next day, it has been descending since. The manufacturer launched a share buyback campaign with the repurchase of 10 million shares at HK$0.73/share on June 21, and the program peaked with the recovery of 26.424 million shares on June 26 and a huge 183 million a day later.