Tuesday, October 11, 2011

Leave LEDS Alone?

Investors have to look high and low to find an initial public offering these days.  A deal is even more rarified in the renewable energy field as low valuations serve up a bit too much dilution potential than most companies are will to accept.  That did not deterred SemiLEDS (LEDS:  Nasdaq) a Taiwan-based manufacturer of high brightness LED chips. 

SemiLEDS went public in December 2010 at $17.00 per share.  Since then the stock has delivered a whopping 131% loss to shareholders who dared to buy shares in the offering.  Weak valuation is not the only problem for LEDS.  The company has yet to show a profit and sales growth has been weak. 

With the stock trading at less than a quarter of its IPO price, it might appear to be a compelling contrarian play.  Caution might the better watchword.  Industry analysts are consistently bearish on demand and pricing for LEDS and there does not appear to be a clear timeline for recovery.   At least the near future may hold “more of the same” for SemiLEDS.  Unless an investor’s time horizon is five years or more, it might be the wisest choice to leave LEDS alone.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. LEDS is included in the Solar Group in Crystal Equity Reseach’s The Atomics Index of alternative energy companies.

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