EvergreenSolar’s balance sheet is a common concern in nearly every earningsconference call. After reviewing earnings on November 4, I concludedthat Evergreen Solar (ESLR) “remains a very speculative bet on survival.” After Monday’s announcement of a major recapitalization plan, it is clear that ESLR’s balance sheet remains in precarious shape.

The recapitalization plan is complex but it essentially extends theduration for servicing existing debt, raises up to $40M in additionalcapital, attempts to reduce overall debt by incenting debtholders toconvert debt into equity, and doubles the amount of shares available tomake room for these conversions and future potential equity-relatedfinancing. A reverse stock-split will save ESLR’s listing on the NASDAQwhich, presumably, maintains the interest of analysts and institutionalinvestors and makes future financing plans more feasible.

Shareholders must approve the plan, and I am wondering whether itwill get approved. Long-suffering ESLR shareholders are likely quiteunhappy about the massive dilution. I will likely vote yes just because I bought into ESLR in the past few months expecting it to be aspeculative play.

Not surprisingly, the market immediately panned the news. ESLR haslost 19% of its value since the announcement of the recapitalizationplan. This move completely wiped out October’s strange surge and now leaves me to conclude that October’s move was at best a random anomaly. I added my last tranche of ESLR on Tuesday when it hit 70 cents. I will now just sit back and see what this “call option” onsurvivability brings. If management somehow saves the company, theupside should be huge. Going bust is the other alternative.

101208 ESLR Recapitalization Plan Sinks Evergreen Solar $ESLR

ESLR’s recapitalization sends stock back toward 52-week lows

*Chart created using TeleChart:

88x31 Recapitalization Plan Sinks Evergreen Solar $ESLR

Be careful out there!

Full disclosure: long ESLR