Maxeon Solar Technologies, Ltd. (hereinafter referred to as "Maxeon"), a photovoltaic company listed on NASDAQ, will face a package of restructuring transactions. The leader is TCL Central (002129. SZ), a leading Chinese photovoltaic enterprise, with the aim of achieving a controlling stake in Maxeon.
On the evening of May 30th, TCL Central announced that it would participate in Maxeon's restructuring. The transaction is gradually implemented in stages, involving different financial instruments such as convertible bonds and private placements, with a maximum total investment amount of 197.5 million US dollars. If the transaction is completed, TCL Central's shareholding in Maxeon will increase from 22.39% to 50.1%, and the latter will become a consolidated holding subsidiary.
Maxeon is not unfamiliar to the industry. 21st Century Business Herald reporters noticed that this photovoltaic company headquartered in Singapore has patents for the IBC battery module series, TOPCon battery process series, and stacked tile module series, which are regarded as an important pivot of TCL Central's global strategic layout.
But as the global photovoltaic market competition enters a white hot stage, overseas photovoltaic companies with relatively weak economies of scale are under significant performance pressure, and Maxeon is no exception. The company's latest disclosed financial report shows a loss of $276 million in the 2023 fiscal year.
Even so, why is TCL Central persistent in controlling this US stock photovoltaic company?
Previously questioned for investing in Maxeon
Looking back to November 2019, Zhonghuan Group, which was still in the era of state-owned enterprises, announced a heavyweight investment news.
The company has partnered with Total Solar International, which has spun off its well-known photovoltaic company SunPower's business outside of the United States and Canada to Maxeon, a company registered in Singapore. Central Holdings has subscribed to approximately 28.85% of the target company's shares, becoming its second largest shareholder. This transaction is valued at approximately 298 million US dollars, which is equivalent to approximately 2.088 billion Chinese yuan at the exchange rate at that time.
A stone stirs up a thousand waves. After the above transaction was announced, a user of a certain stock exchange platform posted an article condemning the unreasonable valuation of the transaction. Subsequently, Zhonghuan Group issued a clarification announcement, in which Zhonghuan Group further disclosed the details of the project promotion: "Since the launch of the project in 2017, Zhonghuan Group, SunPower, and Total have gone through three years of repeated negotiations and due diligence by Zhonghuan Group itself and third-party due diligence institutions on the target company's financial, tax, legal, intellectual property, technology, and other aspects, fully demonstrating the economic feasibility of the investment and maximizing the safety of Zhonghuan Group's investment in the design of the transaction structure."
The exchange also pays attention to the above-mentioned transactions. The management department of small and medium-sized board companies on the Shenzhen Stock Exchange has issued inquiries regarding Maxeon's financial data, core competitiveness and growth potential, as well as the impact of the transaction on the asset liability ratio and debt repayment ability of Zhonghuan Shares.
Finally, on August 27, 2020, with Maxeon's listing on NASDAQ, Central Holdings successfully completed its shareholding in this target company.
It is worth mentioning that during the promotion of Maxeon's investment by Central Group, its parent company, Central Group, also underwent mixed ownership reform. In September 2020, TCL Technology officially took over Central Group, marking the beginning of the "TCL era" for Central Group and subsequently renamed TCL Central.
21st Century Business Herald reporters have noticed that whether it is state-owned or private enterprises at the helm, TCL Central has a special fondness for Maxeon. From April 2021 to May 2023, the company continued to increase its investment in Maxeon through subscription for new shares, convertible bonds, and other means. According to statistics, its cumulative investment is equivalent to approximately RMB 2.591 billion.
However, TCL Central's large investment in Maxeon did not bring significant returns.
In 2023, TCL Central confirmed significant impairment in long-term equity investments and financial assets related to Maxeon, which had a significant negative impact on annual profits.
According to the financial report, last year, TCL Central achieved operating revenue and net profit attributable to its parent company shareholders of 59.166 billion yuan and 3.416 billion yuan, respectively, a year-on-year decrease of 11.74% and 49.90%. Among them, due to a significant decline in Maxeon's performance and stock price during the reporting period, TCL Zhonghuan recognized asset impairment losses of RMB 1.01 billion, fair value change losses of RMB 440 million, and investment losses of RMB 340 million, respectively. After offsetting the convertible bond interest income of 108 million yuan, TCL Central's investment loss in Maxeon in 2023 reached approximately 1.682 billion yuan.
It should be noted that due to the continuous decline in Maxeon's stock price, TCL Central's equity investment value in it is also shrinking.
As of the close on May 31, Maxeon closed at $1.88 per share, down 7.39%, with a market value of $103 million.
What is the value of Maxeon?
Due to the inability to disclose its 2023 financial reports on time, Maxeon recently received a non compliant notice from the Nasdaq Stock Exchange, requiring it to submit a plan to restore compliance before July 16th. A subsequent statement showed that Maxeon updated its financial report release date to May 30th.
Despite announcing its financial report as scheduled, Maxeon's profit situation last year was not optimistic. According to the financial report, the company achieved a revenue of 1.123 billion US dollars in 2023, a year-on-year increase of 5.94%; The net profit was -276 million US dollars, and the loss amount increased by approximately 9 million US dollars.
In fact, Maxeon has been in a loss making state since its listing. Among them, in the past three years (2021-2023), the company has accumulated a loss of 788 million US dollars. And in the first quarter of this year, Maxeon suffered a quarterly loss of approximately $80 million.
What is the charm of Maxeon, with poor performance and low stock prices, that makes TCL Central even if it continues to face huge investment losses?
"The company plans to become the controlling shareholder of Maxeon through a package of restructuring transactions, which will help strengthen the global business development of the company's new energy photovoltaic materials industry, orderly promote international cooperation in the new energy industry chain, enhance the ability to deeply participate in international energy governance reform, enhance the competitive advantage of the company's international layout, and achieve a strategic leap in the company's international business," TCL Central stated in the announcement. Regarding this, 21st Century Business Herald contacted TCL Central for further response, but as of the time of publication, no response has been received.
"The biggest value of Maxeon currently lies in two aspects. Firstly, the company has a significant market share in the United States and has a certain degree of influence. Secondly, the company has abundant patents in hand, involving popular battery technologies such as BC and TOPCon." An anonymous photovoltaic industry analyst told 21st Century Business Herald reporters.
According to Maxeon's financial report last year, the company's photovoltaic module shipments in 2023 were approximately 2.86GW, an increase of 21.70% compared to 2022. Among them, the US market is currently Maxeon's main source of revenue - last year, about 57.4% of the company's main revenue came from this market.
In recent years, the United States has continuously increased its export restrictions on Chinese photovoltaic products, making it difficult for China to directly export photovoltaic cell module products to the United States. For this reason, some leading Chinese photovoltaic companies choose to build factories in the United States, such as Longji Green Energy, JA Solar Technology, and Trina Solar. However, industry insiders point out that compared to China, the overall cost of investing in and building production capacity in the United States is higher. According to research by industry firm InfoLink Consulting, labor and water and electricity costs in the United States are 10% higher than those in China. In addition, some components and auxiliary materials rely on imports, resulting in an additional 10% to 25% increase in production costs.
Deepening the layout of the US market through Maxeon is undoubtedly an important part of TCL's global layout in Central. In addition, the patent held by Maxeon is one of the important reasons for the external interpretation of TCL's increased investment in Central.
In its financial report, Maxeon stated that it has invested approximately $639 million in research and development since 2007, and has obtained over 1600 patents. Based on these patents, the company has also developed the latest product portfolio, including the Maxeon 7 new product based on IBC technology.
However, in recent years, the intersection between Maxeon and Chinese photovoltaic companies has been due to various patent disputes.
According to statistics from 21st Century Business Herald reporters, since 2023, there have been two intellectual property protection notices publicly released by TCL Central, involving companies under Tongwei and Aixu, corresponding to patented technologies such as stacked tile battery module technology and BC battery technology.
The Dutch court has recently dismissed the patent dispute between it and Aixu Corporation over ABC battery technology.