The Company:
GCL Silicon Technology (GCL)
Suite 3601, Two Exchange Square
Central, Hong Kong
(852) 2526 8368
www.gcl-silicon.com

IPO Filing Document: Form-F1

In brief:
A Chinese company supplying polysilicon and wafers to companies operating in the solar industry seeks to raise $863 million and go public on the New York Stock Exchange.

Money raised via the offering will be used to build new production facilities and in other ways improve company operations to increase sales (see Use of Proceeds).

Expected IPO Close Date: TBA

How to participate:
Shares will be issued through Morgan Stanley. Most shares will be made available to institutional and high-net worth clients. Find the nearest Morgan Stanley branch office.

Analysis and Predictions:
At this time, I am basing my analysis completely on materials found in the Form F-1 filing. Links to additional background reporting are provided below.

During the first quarter of 2008, the company stated earnings (profits) of $34,689,000, where for the year before, the company showed losses of $2,907,000 (see Financial Data).

Currently, the company has the following shares outstanding (see Share Capital):

978,333,000   ordinary shares
   16,667,000   preferred shares
==========
995,000,000    total shares

GCL’s earnings per share for 1Q 2008 = $0.0347 per share. I multiplied this amount by four to get a straight line earnings projection of $0.1388 per year (see Pro Forma).

The current Price to Earnings Ratio for the entire S&P 500 is about 20 at this time, meaning the S&P 500 is priced comparable to a bank account paying 5% interest (see Market Gauge).

At a 20x price to earnings ratio, if GCL can maintain their 1Q 2008 rate of earnings through 2008, the shares would be comparatively valued to the S&P 500 at $2.776 per share. This would give the company an approximate "pre-money" valuation of $2.76 billion ($2.776 x 995,000,000 shares).

With the addition of $863 million raised via the IPO, the "after money" valuation (or market capitalization) will increase to approximately $3.63 billion. Since the number of outstanding shares will also increase, earnings per share will be significantly diluted, which could lead to a lower relative valuation per share. In order to simply maintain a stock price of $2.776 per share, the company will likely need to grow quarterly profits from the 1Q 2008 level by 31%, to over $45 million per quarter.

After the IPO, I look forward to watching the stock price become established in actual public trading, and comparing it with this analysis and predicted valuations.

It appears that most of the IPO shares will be reserved for Morgan Stanley’s top-tier clients. As a result, for most people the earliest opportunity to invest may be immediately after the IPO. I will keep you apprised of that.

Additional Background:
Reuters - GCL Silicon files for IPO of up to $862.5 mln
earth2tech - GT Solar, GCL Silicon Brave Troubled IPO Waters

Mark Winstein
Founder
www.EcoSector.com