Welcome to the US and the Big Board, LDK Solar! Now, show us your books.

by Jeff Dorsch, November 7th, 2007, 7:00 am

LDK Solar, a manufacturer of silicon wafers for solar cells and modules, is a young company. It was incorporated in China in 2005, reincorporated in the Cayman Islands the next year, and went public on the New York Stock Exchange last June.

The company enjoyed one of those fast-track IPOs for overseas firms, filing its F-1 registration statement with the SEC May 11 and making its Big Board debut only three weeks later.

LDK Solar is now growing familiar with the ways of bare-knuckled, albeit highly regulated, capitalism. The freewheeling business practices in the People’s Republic of China don’t quite jibe with how business is done in the U.S. of A.

The company went public at $27 a share and its stock ran up to nearly $77 this summer, buoyed by the general market euphoria over solar power.

Then the stock market and its investors heard from a man named Charley Situ, and LDK’s stock plunged 26% in one day. The stock price has been bobbing around the upper 30s ever since.

An accountant based in Hong Kong, Mr. Situ had gone to work for LDK earlier this year to help shape up the company for its IPO. In September, he began raising the issue of apparent discrepancies in silicon inventories. Depending on who’s telling the story, Mr. Situ resigned or was fired soon after, but not before he alerted LDK’s auditor, KPMG, and the SEC about the inventory issues he had uncovered.

The company first said its management had looked into the inventory questions and found that Mr. Situ’s allegations “have no merit.” The story refused to die down, however, battering LDK’s stock and — more importantly — its reputation in the States.

Last week, LDK Solar disclosed that it had been contacted by the SEC regarding these accounting issues. It’s also been hit with several class-action shareholder lawsuits. Perhaps not coincidentally, the company said the two outside directors on its board’s audit committee will conduct an investigation, with the aid of an outside law firm and an accounting firm other than KPMG.

So, welcome to the US, LDK Solar, and we hope you enjoy your stay.