A Curious Case of "Complete Solaria Inc." and a Short Seller Attack
What a "Short Seller Attack" Looks Like...
As I was doing some research on Micro & Nano Cap Gapping stocks, I came across a pretty interesting story of a stock that was targeted in a what was claimed to be Short Seller Attack.
For someone coming from swing trading stocks with greater than $250M market cap, this type of event rarely happens. And for me, I found this story to be incredibly interesting. This is the story of “Complete Solaria Inc.” (CSLR 0.00%↑).
An Overview of the Company
Company Name: Complete Solaria Inc.
Company Mission: To deliver energy-efficient solutions to homeowners and small to medium-sized businesses that allow them to lower their energy bills while reducing their carbon footprint. Complete Solaria, Inc., or Complete Solaria, has created a unique, end-to-end offering that delivers a best-in-class customer experience with a robust technology platform, financing solutions, and high-performance solar modules.
Sector, Industry: Technology, Solar
Shares Outstanding: ~45M
Float: ~25.5M
Market Cap (On Apr12): $25.5M
Institutional Ownership: 22%
Before the Attack
CSLR has been consistently declining since July, 2023. With lower highs the stock seems relatively dead from a price action standpoint. In July of 2023, the price was ~$10. In March 2024, the price dropped below $1.
The Attack
On April 15, a short seller attack occurs resulting in a 59% drop in price.
On April 16, and internal memo to employees is sent out by T.J Rodgers (at the time, chairman of CSLR) to address the short seller attack. In this memo, T.J Rodgers addresses the short selling attack by stating that:
“On the Friday before the short attack, I issued a press release saying that our board had granted 2.1 million options to employees as a reward to our remaining 110 employees. The board granted you those stock options at a market price of $0.51. One working day later – for the first time – our stock suffered a massive short attack that cut our share price in half and put all employee options under water. Who would do such a thing to us? A big investor who just wanted some money back would have traded in such a way to get as much money back as possible, not to drive the price down, unless, for example, there was a sense of urgency based on new information.”
T.J Rodgers hypothesized that the private equity company working on the stock options for CSLR could be the reason why the information was leaked and ultimately led to this event.
On April 18, the internal memo to employees from T.J Rodgers was publicly stated in a press release.
The Aftermath
What resulted from this was a ~140% move to the upside. Once the retail market got wind of this, it seemed like a short squeeze started at 11:55am which spiked the price to over 100%. From there, liquidity ran dry until the later half of the day, where the price of CSLR broke its high of the day.
On April 21, CSLR released an updated version of its internal memo detailing the short attack and making it very clear that he believes this was indeed a short attack.
He includes this image with a description…
He explains in detail his hypothesis of the private equity firm leaking information which resulted in the attack:
“The selling started precisely at market opening on Monday. Who could have decided to sell aggressively during the weekend? After reviewing the list of the 28 calls I made on Sunday, only two people stand out as having gotten new non-public information from me. Both are employees of private equity firms.
On Sunday, I told Kline-Hill’s Rick Orlando that our company was being squeezed to death by his company and Carlyle – firms that were supposed to be helping us. I pointed out that our revenue had dropped from $20.6 million in the fourth quarter of 2023 to just $10 million in Q1, because – despite having the orders – we did not have the working capital to buy solar panels to install. What investor would be foolish enough to invest new working capital in a company with Carlyle keeping it in an ongoing and debilitating state of uncalled default?
I also told Rick Orlando something new – in confidence and covered by our non-disclosure agreement – that unless we could free our company from this suffocating private equity control, I would resign and let Carlyle run it – which would be a death sentence for Complete Solaria. Rick confirmed that he communicated my thinking to our Carlyle contact, Andrew Kapp, an adversary who has threatened to veto critical deals for us on more than one occasion. Kapp is the architect and manager of our current financial state of paralysis in which we cannot even raise money without his permission – which is given only if we capitulate to a new demand of theirs. That’s how the $26.4 million they loaned us turned into $37 million today, two years later.
The point is that these two private equity people were the only people to have this inside information that their executive chairman, an experienced operations executive, intends to walk off on them unless they find a way to remove the financial boa constrictor. Of course, this strong circumstantial evidence does not prove that Kline-Hill or Carlyle did this to us or enabled others to do it.”
Current Standings
Timeline:
April 15, 2024: Short Seller Attack occurs resulting in a 59% drop in price
April 16, 2024: Internal memo to employees, sent out to address the short seller attack.
April 18, 2024: Press release publicly showing the internal memo, stating a short seller attack.
Apr 19, 2024: Short Squeeze! Stock rises over 100%
April 21, 2024: An updated version of the internal memo goes out to the public.
April 29, 2024: CSLR appoints Executive Chairman T.J. Rodgers as Chief Executive and promoted Chief Financial Officer Brian Wuebbels to Chief Operating Officer.
May 2: Kline Hill Invests in Complete Solaria with Debt-Equity Swap
As of right now (May 6, 2024), it seems like CSLR has beaten a vicious fight. Let’s see what happens next…
One thing I know for certain though, CEO, T.J. Rodgers, is one resilient mother fucker and I am for it!
Thanks for reading. This is not my normal post but I think as a swing trader, we don’t see these types of things happen often, and even as intraday traders, this is probably not a regular occurrence. But I thought this would be a nice introduction into the Wild West of Micro/Nano Cap stocks. Until next time!
-F4VS