June 10, 2011 / 10:26 AM / in 8 years

First Solar short interest at 37.4 percent of float

LOS ANGELES (Reuters) - Short interest in First Solar Inc rose to 37.4 percent of the company’s free float as of May 31, according to Nasdaq data released on Thursday.

The company’s short interest had been 30.8 percent of the float as of May 13.

The solar sector — and First Solar in particular — has been a target for short sellers, who benefit as a stock declines. They borrow shares and sell them with the expectation of buying them, or covering their shorts, at a lower price.

On May 25, famed short seller James Chanos said he is betting that shares in First Solar will fall, in part because solar power is still too expensive to compete with traditional sources of electricity generation. He also said Chinese competitors are increasing capacity and cutting costs so rapidly that profits across the industry are suffering.

A First Solar spokesman had no comment on the Nasdaq data.

First Solar shares closed at $114.06 on Thursday. They have fallen about 35 percent since hitting a 2011 high of $175.45 in February, and one analyst said some investors are getting more cautious on shorting the solar sector.

“The borrow on solar stocks has become more difficult, although not impossible,” said Mizuho Securities USA analyst Paul Clegg. “When you’ve had this much of a downdraft — and there has been a more than 30 percent correction in solar since January — it becomes increasingly difficult to think of new reasons why the stock should go down.”

Clegg has an “outperform” rating on First Solar.

The number of shares of First Solar held in short positions rose 21.38 percent to 21,237,997 as of May 31 from 17,496,566 as of May 13. As of April 30, the company had 56.74 million shares in its free float.

It would take 9.97 days to cover the short positions in First Solar shares, based on the stock’s average daily volume. That’s up from 7.39 days in the prior period.

(Additional reporting by Matt Daily in New York)

Reporting by Nichola Groom; Editing by Gary Hill

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