Another update on Polypore (PPO) after the company’s conference call today

Polypore International (PPO) just finished an investor conference call.

You’ll remember the stock fell 30% on Monday, January 31, when the combination of a short recommendation from Axiom Capital and news that Polypore customer LG Chem would start making battery separator membranes itself—instead of buying them from Polypore, the market assumed—created panic selling. More than 26 million shares traded hands that day, way above the daily average of 960,000 shares.

Since then the stock has rebounded to $46.53 a share (as of 1 p.m. New York time on February 3) from the January 31 close at $38.08. That’s still way below the $56.38 close on January 27. (The stock is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ )

So what did Polypore have to say today? (For instructions on how to listen to the replay go to http://investor.polypore.net/releasedetail.cfm?ReleaseID=646084 )

The call began with a discussion of the market for separator membranes in lithium batteries, moved to a technical discussion of the differences between wet and dry separators, and then finished with a few details about what it sells to LG Chem and what that Korean company is actually planning to manufacture.

I found it a reasonably good refutation of the math that put the Axiom short recommendation and the LG Chem news together to get panic selling. Read more

I hate it when this happens. A high-profile short names a stock as his/her pick for the next big short. And then we get just enough bad news to leverage that pick into panic selling.

That’s pretty much what happened yesterday, January 31, to shares of Polypore International (PPO), a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ The shares finished down almost 30% today (a drop of $16.26 a share) on volume of more than 26 million shares. Average daily volume for Polypore is about 960,000 shares.

The story of this rout begins on Monday, January 30 with a call by Gordon Johnson, an analyst at Axiom Capital. to short Polypore. The target price for the stock, then trading at $54.34, was an eye-popping $26 a share. Johnson and Axiom had previously been very vocal on shorting thin-film solar panel producer First Solar (FSLR). That call has been very profitable in the global collapse of solar stocks. Online news sources such as TheStreet.com picked up Axiom’s call. The Street’s story was headlined “The next great alternative energy short is…”

I understand the basis of Axiom’s call—although I disagree profoundly. Read more