Update Ormat Technologies (ORA)
Ormat Technologies (ORA) has been on a very slow recovery track since it hit a low of $27.76 on March 29. The shares were up about 12% as of 2 p.m. ET on April 22, 2010, to $31.08. That still leaves the stock a lot of work to do before it gets back to the $41.08 where I bought shares for Jubak’s Picks on November 17, 2009.
Ormat Technologies shares crashed on a February 23 announcement that it would restate its financial statements for all of 2008. The company had concluded that its accounting treatment that capitalized certain exploration and development cost was inappropriate and that the company, at the SEC’s urging, expense these costs. That will have the effect of moving these costs onto the company’s books much more quickly.
The news generated a rush to court with lawyers filing class action suits in behalf of shareholders charging that the company, in the language of one suit, “recklessly disregarded that their public statements concerning Ormat’s business, operations and prospects were materially false and misleading. Specifically, defendants made false and/or misleading statements and/or failed to disclose: (1) that the Company was improperly continuing to capitalize costs for individual projects after Ormat had decided to abandon further exploration and development of individual projects instead of expensing those costs in the period in which any such determination was made; (2) that, as a result, the Company’s financial results were overstated during the Class Period; (3) that the Company’s financial results were not prepared in accordance with Generally Accepted Accounting Principles (GAAP); (4) that the Company lacked adequate internal and financial controls; and (5), as a result of the above, that the Company’s financial statements were materially false and misleading at all relevant times.”
Nothing good for the share price in either Ormat Technologies news or in the flurry of lawsuits. I take the law suits seriously. After all in the period that the suits name, May 6, 2008 to February 24, 2010, the share price fell from $50 to $22. Multiply that by the 45 million shares outstanding and you’ve got $900 million in losses to investors. That’s a lot for a company with annual sales of just $415 million.
But most class action suits never go to trial, getting settled for a payment far below the alleged damages. In those that do go to trial the final award is seldom equal to the alleged extent of shareholder losses.
Especially when as in the current situation, part of the decline in the stock was due to a general collapse of the stock market. Remember that the stock market didn’t hit a bottom until March 2009. Good luck collecting on the drop in Ormat’s share price from May 2008 through March 2009.
And then there are sound fundamental business reasons for the decline in the company’s stock since May 2008. Fundamental problems that increasingly seem behind the company. Read more
Looking for profits from the end of the energy log-jam
The news yesterday from Progress Energy (PGN) that it would shut 11 of its coal-fired plants by 2017 and replace them with natural gas and nuclear power plants shows how the lack of climate-change legislation from Congress is creating a huge backlog of energy construction projects.
Because I expect that Washington log-jam to break sometime in 2010, I think this is a good time to begin scouting around for companies that would benefit from a post-log-jam burst of construction. I’ll give you a few tentative suggestions at the end of this post. Read more
