According to recent media reports published in China, Toronto-based hedge fund BHP International Markets Ltd. is sitting on losses of as much as 3 billion USD after taking a short position on 1.2 billion shares of surging Chinese solar company Hanergy Thin Film Power (00566.HK).
The hedge fund, headed by Scott C. Dorey, a former senior investment banker at Lehman Brothers in New York, took out the short positions from Nov. 2012-Jan. 2013 at .2-.5 HKD, China Securities Journal reported. Since then, Hanergy's stock price has soared to a record high of 9.07 HKD on March 5th before settling down to close at 6.61 HKD on March 18th. With the clock ticking to close their position by the end of the year and with a relatively small free-float of available shares, BHP could be forced to pay a premium at 12-20 HKD per share, eating losses of up to $3 billion.
Hanergy, which is now the world's biggest clean energy enterprise with a market cap more than 5-times that of leading U.S. solar firm First Solar, is engaged in the production and development of thin-film solar panels. Its world-beating stock rise has come amidst a rising tide of public concern in China about environmental issues and interest in clean tech stocks. Since the beginning of the year, its share price has rocketed 135 percent, driven in part by its status as the most-traded stock in the Hong Kong-Shanghai Stock Connect program. Through the connect, Hanergy has gained net inflows of 400 million USD over the past two months, the most of any participating stock and 6.6% of total turnover of the period.
The Chinese media reports highlight the desperate measures some short sellers are taking to tamp down Hanergy's share price. Hong Kong Next Magazine recently reported on a group of short-fund managers from the U.S. flying to Hong Kong to meet with media in an attempt to drum up negative news reports about Hanergy. China Securities Journal reported on mainland investors having their share-pledge loans backed by Hanergy stock reduced to a rate of zero by a British bank with offices in Hong Kong. The practice was unprecedented, the reports noted, and could have been orchestrated by short sellers looking for gains from a massive stock sell off.
Despite the short attacks by BHP and other firms, Hanergy's fundamental remain intact according to the media reports, and as it develops its downstream businesses and explores the consumer market, the upside growth potential is great.
