JA Solar gains after completing follow-on

The $266 million debut follow-on is priced at a 2.2% discount but triggers a 5.6% rally in the secondary market.
Nasdaq-listed solar cell manufacturer JA Solar Holdings priced its marketed follow-on offering at a 2.2% discount to WednesdayÆs close, allowing it to raise a total of $266 million. Only 63% of the shares on offer were new, however, which means not all the proceeds went to the company.

This was the first offering of shares in China-based JA Solar since it went public in February this year and the sale met with strong demand. According to one source, the deal was about four times covered and attracted about 50 to 60 investors, including some existing shareholders. The interest continued in the secondary market last night, pushing the share price to a new intraday record of $49. It ended the session 5.6% higher at $45.35, suggesting at least some investors werenÆt happy with their allocations and chose to top up their holdings in the market.

One observer notes that the strong interest is part of a recent trend whereby US investors are increasing their exposure to Asia through discounted share offers. China Digital TV Holding, which debuted on the New York Stock Exchange on Friday last week, soared 219% in the first three sessions to above $51, after pricing its IPO at $16. Since then, the provider of connectivity access services for digital TV systems has eased back somewhat, however, and finished ThursdayÆs session at $42.27 û less excessive, but still 164% up since its debut.

Including ThursdayÆs gains, JA Solar has more than tripled since its IPO at $15.

The solar power play offered 6.33 million shares, or 12.6% of its enlarged share capital, and priced the deal at $42. This equalled a 2.2% discount to WednesdayÆs close of $42.93. Four million of the shares were new, while the rest were existing shares sold by three different entities controlled by the chairman, the chief executive officer and the chief technology officer. The chairman remains the single largest shareholder with a 25.3% stake after this transaction (pre-greenshoe).

There is a 15% greenshoe that could boost the total deal size to $306 million.

The company said it will use $50 million of the proceeds to purchase and make prepayments for raw materials, which remain in short supply. In the listing document, the company said it believes it has contractually secured an adequate supply of silicon wafers to meet its anticipated production needs for the remaining months of 2007 and a large portion of its anticipated production needs for 2008.

It will spend $70 million to buy manufacturing equipment and to construct manufacturing facilities in order to expand capacity and $10 million to enhance its research and development facilities. JA Solar plans to add up to 10 new manufacturing lines to boost its solar cell manufacturing capacity to 425 megawatt per year by 2008 from 175MW at present.

Credit Suisse and Lehman Brothers were joint bookrunners for the deal.
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