Chinese maker of solar cells, LDK Solar Co would soon report on its inventory levels.
Chief Financial Officer Jack Lai said that in a matter of days, the company likely would file a report with the Securities and Exchange Commission and publish information reconciling data from a management assessment and that collected by its independent auditing firm on its inventory of polysilicon, the raw material for solar-cell manufacturing.
The Xinyu City, China, company saw its U.S.-listed shares drop to $50.95 at Friday's close from $68.25 at Wednesday's open. That day, a Piper Jaffray report said LDK's financial controller, later identified as Charley Situ, had left the company. Situ alleged LDK had a 250-ton (227-metric ton) polysilicon inventory discrepancy and poor financial controls, the report said.
LDK responded that management's own inventory count found no grounds for the allegations. The company also said an independent auditing firm is working on a separate count, although Lai declined to name that firm. LDK's regular external auditor is KPMG.
LDK shares sank $13.45, or 26 percent, to close at $37.50 Monday.
Barron's said in its Monday editions that investors should be concerned that LDK's book value, and therefore its profits, is overstated. The shares go for nine times book value and more than 40 times this year's forecast earnings.
Interviewed by Clean Technology Investor on Friday via telephone at his office in Sunnyvale, California, Lai said he was about to fly to China, where he expected to arrive Sunday evening and focus on "getting this matter resolved."
He said neither the SEC nor any other regulatory bodies have contacted the company.
Lai said LDK expects to meet all of its revenue, production and delivery targets regardless of the allegations about its inventories. For its third quarter ended Sept. 30, LDK estimated revenue of between$115 million (81.62 million EUR) and $125 million (88.72 million EUR).
One of the points Lai said Situ raised was that LDK has only 7 percent polysilicon that's useful. "It's true if (Situ's) talking about virgin polysilicon," said Lai, but he noted that the 3,000 employees at the company's factory in Xinyu City process recycled polysilicon as well as virgin stock.
Attempts to reach Situ were unsuccessful.
Piper Jaffray, which issued the initial report saying the controller left, said Situ sent his allegations to the SEC and LDK's external auditor, KPMG.