Gordon Johnson of Axiom Capital Management Inc. is the short selling 3rd Avenue Financial Analyst Solar Energy companies are learning to hate. His business is making money from the the failure of unsustainable renewable business models.
Guest essay by Eric Worrall – February 20, 2017
The Most-Hated Bear in Solar Isn’t Backing Down
by Brian Eckhouse
16 February 2017, 20:00 GMT+10 17 February 2017, 15:01 GMT+10
When Elon Musk’s SolarCity hosted stock analysts about a year ago to gush about its prospects in the solar industry, Gordon Johnson was nowhere to be found.
It seems that Johnson, a 36-year-old analyst at boutique advisory shop Axiom Capital Management Inc., wasn’t invited. This may not have been an oversight; it happens to him a lot.
“Everybody hates me,” says the New York-based analyst in jest, acknowledging his reputation as solar’s notorious bear, a soundbite-ready contrarian among a group of analysts generally bullish on the industry’s long-term prospects. “Companies don’t like me because I have sell ratings on their stocks.”
These days, Johnson has a sell rating on every stock he follows (including some steel companies), and he has a fresh reason — Donald Trump. Johnson figures the president, a renewables critic during the campaign, may attempt to revoke federal subsidies for solar — a minority opinion, to be sure. “It would be a big negative for renewables, particularly solar,” Johnson says. Tax reform would also hurt.
A solar skeptic since his tenure at Lehman Brothers a decade ago, Johnson isn’t beloved among the companies he covers, not to mention other Wall Street solar analysts. Some observers view him merely as an ally of the hedge funds and other short-sellers that are his clients, and sometimes just lucky in playing what they call the solar-coaster.
Johnson’s contrarian view derives from a simple thesis: solar, he says, can’t compete with, or replace, natural gas because it can’t provide around-the-clock power and because it has needed subsidies to be competitive.
Short selling is heavily maligned in the popular press, where reporters often characterise it as a dangerous game played by wreckers.
The reality is a successful short sell usually only works if the targeted company is already a wreck. Short selling clears the fog of spin, revealing the ugly reality beneath the glossy brochures and rosy, overhyped forecasts. Short selling forces worried investors to ask uncomfortable questions – questions target companies often wish remained unasked.