Last week, HOKU gained more than 26 percent to $14.05. If anything resembled news, it was the approval of a $25 million line of credit, which management didn't make an official announcement about. They expected the approval, and when it came to fruition, it was basically an after-the-fact matter.
For shorts and bears, however, it removed one more bullet from the chamber. The run since June 12, when it was $4.50, has left them wondering when, if ever, the PPS will match actual revenues and earnings. That's what makes this a tough call for pragmatic, logical thinkers. How can other people (bulls) invest in something that doesn't exist. There's still no polysilicon production plant. There's no product to hand over to clients in China and Germany. And there won't be until the first half of 2009 at earliest.
However, this is a different world than the one that based everything on visual testimony. There are enough buyers and believers in Hoku to support the Co's belief that the plant in Pocatello will be built on time, that the contracts worth $1.2 billion will be fulfilled. If the bulls would be wrong, so would the Bank of Hawaii. The world, according to Hoku, is not flat after all.
Bears had their chance today to make a clear statement about where HOKU really should be. Hoku's run to a new high last week was built on a softening foundation of buyers. Wednesday's volume was strong at 11.6 million shares, but dipped to 7.1 million on Thursday and just 4.6 million by Friday's close. The pullback was expected.
Time for a breather. Bears had their chance in today's stagnant market. HOKU's biggest dip during the blast-off that began on June 12 was 18.5 percent. From today's high of $14.55, that means the PPS could fall to $11.85 if the pattern persists.
HOKU traded down to $12.88 mid-day, a pullback of 11 percent, before closing at $13.42.
The most telling factor, though, was volume. With no good news to push the stock, bears failed to bump Hoku longs off board. The stock closed down on only 4.7 million shares, virtually the same lack of conviction that pushed the stock up on Friday. Are market makers leveling off seekers of shares for shorting, as some bear conspiracy believers contend? Or is the strength of the PPS purely a matter of bulls overwhelming bears?
The most extreme thinkers among bears are promising that Hoku is heading to zero. Conversely, there are number crunchers on message boards like YMB who feel otherwise. Paladinmercenary estimates that HOKU will be worth $164 per share by 2009. Yup, two extremes, 0 and 164.
In probability, the truth lies somewhere in between. Maybe the foes are a bit too absolute in their thinking, but the lines have been drawn and the battleground is definitely being covered in bear blood so far. After all, if you own 1,000 shares of HOKU, there's quite a chasm between the thinking of a bear and a bull. Where does Hoku the stock go?
That could be the $164,000 question.
Disclaimer: Pupule Paul owns a scant number of shares in HOKU.
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