Market Overview

Hsieh Resigns, Shocks The Street

This morning LDK solar (NYSE: LDK) announced surprising news. Mr. Louis T. Hsieh, an independent director, has resigned from the company's board of directors. Mr. Hsieh's resignation surprised traders, sending share values down from 6.296 to 6.08 in just 12 minutes once trading had resumed.

Share values now appear to be recovering, but it is clear that the news shocked the street.

One can see why it was such a shock. Mr. Hsieh is a highly qualified and experienced leader in his field. He holds a B.S. degree in Industrial Engineering and Engineering Management from Stanford, an MBA from the Harvard Business School, and a J.D. from UC Berkeley. In the past (2007-2009) he has held similar board positions at Perfect World Co. (NASDAQ: PWRD) and China Digital TV Holding Co (NYSE: STV).

He left those boards in 2009, opting to instead focus on other professional commitments. It was a career change he had been working toward, and the transition was made transparent.

The question is now why Mr. Hsieh resigned from this board, as no reason has yet been provided. More importantly, Mr. Hsieh is currently CFO for New Oriental Education and Tech Group (NYSE: EDU). What could his resignation mean for New Oriental? What does it mean for LDK Solar?

Without details on Hsieh's motivation for leaving LDK's board, it is hard to say. Benzinga reached out to LDK Solar for details about Hsieh's resignation, but nobody was available for comment.

Speculation around the web has begun to cite problems at LDK from auditing issues to none at all. The most notable fact of all is that ThinkEquity has kept its buy rating for LDK Solar, though it lowered the target price from $10 to $8. This is evidence that things probably are not the "scandal" some are suggesting.

It is possible that Mr. Hsieh resigned out of concern for the direction LDK is taking. The company has a very large amount of leveraged debt, for example. It may, however, be other issues, like increasing government involvement or changing his career direction. As we await more news, expect share value in LDK to remain unpredictable.

More importantly, if you are watching EDU shares, pay close attention to what's going on with Mr. Hsieh. He may be experiencing woes at LDK that can affect New Oriental.

ACTION ITEMS:

Bullish:
Investors who believe that the shock from Mr. Hsieh's resignation is overblown might want to consider the following trades:

  • Pick up LDK shares before they recover
  • Play EDU without regard for Hsieh's resignation from LDK's board
  • Keep an eye out for Hsieh's next career move and capitalize on it

Bearish
Investors who believe that Mr. Hsieh's resignation is a sign of bigger (and worse) things may consider an alternate positions:

  • Drop LDK while it is still in limbo and before shares fall further
  • Sell EDU while shares are still quite high
  • Sell China focused semiconductor companies like LDK if you are concerned about growing government involvement

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: News Management Trading Ideas General

 

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