Wednesday, August 27, 2008

Investing in Timminco: Counting on a Miracle

A recent analysts' report, in preparation over a period of three months, suggests that investors should be very wary of Timminco, a Canadian silicon-processing company.

The report, by Neeraj Monga and Chris Silvestre of Veritas Investment Research, was picked up on last week by a reporter for the (Toronto) Globe & Mail.

Timminco claims to have developed a revolutionary way of producing the silicon used in solar cells at low cost, a claim that is certainly an enticing one in the present lets-escape-from-hydrocarbons climate.

These claims became especially newsworthy this spring when Sprott Asset Management went public. Timminco's stocks are central among those assets Sprott has been managing of late.

The Veritas report says: "Our review of industry literature, the view expressed by various industry participants in public forums, circumstantial evidence surrounding lack of progress in volume delivery at Timminco, a convoluted ownership structure ... all suggests it will be a miracle if Timminco can deliver on its promises."

The story is worth following, because this is one of several cases in recent years when a company experiencing a stock price drop has blamed malicious rumors spread by short sellers. And, as with many other such cases, those malicious rumors turn out to be true. The short sellers were on to something.

I could name some other examples of company's blaming shorts for telling truths, but instead I think I'll just move on to a couple of bits of housekeeping.

Damien Park, of Hedge Fund Solutions LLC, has started a new blog on "activist investing."

If you're interested enough in the struggles for control in corporate suites to be reading Proxy Partisans, you'll probably want some familiarity with Park's new site, too.

In other news of a bibliographic sort, CRC Press has published an Encyclopedia of Alternative Investments, edited by Greg N. Gregoriou.

I haven't seen it yet. But Gregoriou, an associate professor of finance at the State University of New York (Plattsburgh) has an impressive reputation in the field.

Stay groovy.

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