Why Trina Solar Limited's Shares Fell 28% in August

By Markets Fool.com

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Image source: Getty Images.

What happened

Shares of solar manufacturer Trina Solar Limited (NYSE: TSL) jumped 27.5% in August, according to data provided by S&P Global Market Intelligence, after getting an offer to go private. And unlike other offers to take Chinese solar manufacturers private, this one might stick.

So what

The offer,led by CEO Jifan Gao and joined by three other investment firms, will pay $11.60 per ADS for the company. It's also a "definitive agreement," a change from a non-binding offer made in December. Given that shares are trading over $1 below the offer price, there's still upside if the deal goes through.

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There are a number of reasons the offer could fall through and financing needs to be finalized if the buyers are using debt, but investors are buying into the offer right now.

Now what

There are challenges ahead for solar manufacturers with panel prices falling and 2017 demand potentially falling as well. Thus, a buyout may be the best option for Trina Solar. The risk is with a deal going through, so investors should consider taking some of last month's gains off the table. Offers to take Chinese companies private have fallen through before and that could happen again with Trina Solar.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.