Strategic Review Concludes with Edge-Anticipated Chinese Listing
In January 2020, we highlighted Canadian Solar, Inc.’s (CSIQ) strategic review for the split between its solar panel manufacturing and energy services segments, and our belief in further value in listing the former in China. As of July 27, the company has concluded this strategic review with an IPO of the MSS segment on the Chinese markets. Our previous valuation anticipated a Spinoff of MSS, so we have updated it to reflect the new strategy.What We Said…
As of March 27, 2020: We believe the Spinoff of Canadian Solar, Inc.’s (CSIQ) MSS business is a strong potential catalyst for the company, though we estimate that listing the MSS segment in China is a better option as we have seen better valuations for solar manufacturing in China than in the US. For an example of value creation in an international listing, Naspers Ltd (NPN SJ) sought to narrow the 20% valuation gap to its Tencent Holdings Ltd stake (Tencent). NPN (a South African internet company) Spun off its international business into a new company Prosus NV (PRX NV), which was listed in the foreign exchange Euronext Amsterdam. The Spinoff was completed on September 11, 2019, with PRX shares surging more than +25% on the first day compared to the Euronext NV (ENX) return of +0.1%, completely eliminating the valuation gap and achieving NPN's goal of the same.
What’s Happening Now?
On July 27, 2020, CSIQ announced the conclusion of its strategic review, and rather than listing the MSS segment in China via a Spinoff, it is instead performing an IPO carveout. This process is anticipated to take between 18 to 24 months, and will involve raising equity from Chinese investors to meet listing requirements on either the Shanghai Stock Exchange’s Science & Technology Innovation Board (STAR market) or the Shenzhen Stock Market’s ChiNext Market.
The Edge Group - Global Fundamental Catalyst Investing. The Edge provides investors with access to hidden corporate value from Global Special Situations using a pioneering approach to investments. Founded in 2005 by fund management and investment banking professionals to provide high quality, private equity-level research on Global Corporate Divestitures for the benefit of fundamental event-driven, growth and value-oriented investors in this difficult to track, but proven investment space.
The Edge will look to screen and analyze include Spinoffs; Reverse Morris Trusts; Squeeze Outs; Privatizations; Demutualization; Deep Discounted; Rights Issues; Rights Offering; Restructuring; Insider Purchases / Buying Change of Management / CEO Change; Deteriorating fundamentals; Post-Bankruptcy; Reorganization; Tender Offer; M&A Deals; Secondary Offering; Share Swap; Thrift Conversions; Share Buybacks; Activist; Mergers. All analyzed from a fundamental point of view.
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