Oh Canada: Timminco Shorts Find Nothing Funny in Stock’s Ramp

Canadian stock promoters give me the shivers; every time I see the word Vancouver I break out in a cold sweat.

Of course not all is bad north of the border; we are more than happy to take their oil, Blackberries and Stanley Cup. But the battleground over a little known Toronto-based silicon company, that happens to be one of the largest winners in the portfolios at newly public fund manager Sprott, Inc is a throwback to the cloak and dagger stories I used to hear from Grandpa StockJockey.

The rabid interest in solar stocks has attracted investors like flies to shit, and anything goes for investors who were more fearful of missing the party than losing precious capital. But a brawl has broken out over the prospects for one red-hot stock, whose skeptics are getting more vocal with every uptick in the stock:

Timminco is suing a fund manger, Ravi Sood, and his firm, Lawrence Asset Management, for libel after Sood allegedly called the company “virtually worthless.”

The Toronto-based silicon company is seeking more than C$6 million in damages, according to The Globe and Mail, which reported that the lawsuit filed in the Ontario Superior Court of Justice alleges that Sood and his firm have launched a campaign to drive Timminco shares down. “There is no evidence that they have any sort of proprietary technology. There is no evidence that they can actually deliver on their claims," Sood said in an appearance on the Business News Network in April, according to the lawsuit. Green Tech Media

Solar grade silicon is tough to come by, a fact not lost on Timminco (TIM.TO-Toronto) bulls.

No position for me, although I remain partial to the beautiful women of Montreal. But is the investment thesis more worthy of an appearance at Juste Pour Rire than your portfolio? This battle is Canada’s version of Einhorn vs. Lehman:

The stock, which was worth less than a dollar per share last March, is up nearly ninefold from a 52-week low of C$3.43 per share about a year ago.

The company has drawn support and skepticism from industry insiders for claiming it has developed a process to make solar-grade silicon out of dirtier metallurgical-grade silicon at lower costs than its competitors.

With solar-grade silicon in a shortage for the last few years, silicon has become costly, and a number of researchers have been working on ways to upgrade metallurgical silicon to bolster the supply. But so far, companies haven’t been able to deliver upgraded metallurgical silicon at a lower cost per watt. Timminco has been secretive about its technology, leading to rampant speculation about whether it can meet its promises.

Yes, this is a ramp worthy of First Solar. But with the animal spirits beginning to cool, you have to wonder if the solar hype is starting to wane ever so slightly. Due diligence would have cost you time and money, but investors are finally starting to look under the hood of their one-way panel plays, and some granularity is finally coming to light:

The Prometheus Institute forecasts that the availability of silicon and thin-film panels, which use little to no silicon, will grow from 3.14 gigawatts worth in 2007 to 12.36 gigawatts worth in 2010, while demand will grow more slowly, reaching 6.76 gigawatts in 2010.

“There seems to be an increasing realization in the marketplace and there’s really a tremendous amount of supply coming online in the next year or two, and that may be weighing on this as well,” Zindler said.

I don’t have a dog in this fight, and missed the ramp in anything to do with solar. Including the new highs today in Timminco.

And while green technologies might be a fad, gravity never goes out of fashion.

Unfortunately for short sellers, it has yet to make its presence known in this story.

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