Sprott fund managers took turns going to bat for the stock on BNN. They testified about Timminco on call-in stock-picking shows watched closely by a small but dedicated army of retail investors. They constantly talked up the company and explained how it was likely going to transform the solar industry. For example, in July, 2007, when Timminco was trading at about $5.75 per share and Sprott was still building up its stake, Sprott fund manager Peter Hodson was on BNN recommending the stock. A year later, when Timminco shares had slipped from their $35 highs, Hodson was still touting them. “This is a great example of paying more for a company that is less risky than it was a year ago,” Hodson said. When asked about the critics and short sellers who questioned Timminco’s secretive ways and raised potential credibility issues, Hodson said: “Quite honestly, that whole argument is a crock.”
On July 15, 2008, just a week after Hodson’s BNN appearance, it was the turn of superstar Sprott fund manager Jean-François Tardif. He said if the company was able to deliver on its promises, the stock could easily go to $50 or even $100. What Tardif didn’t mention (and he wasn’t asked) was the fact that he had already sold the bulk of his fund’s stake in Timminco.
Timminco stuck to its claims as doubts mounted. Citing competitive concerns and its patent-pending process, Timminco disclosed few details about its breakthrough, saying only that it had employed well-known metallurgical techniques, along with a number of new tweaks and innovations. But the wall of secrecy only gave more ammunition to Timminco’s critics.
One man who saw inside Timminco’s secret plant was Michael Rogol, who headed Boston-based Photon Consulting. Photon had been a significant benefactor of the solar boom, and as the creator of a trade magazine and conferences for the industry, it had a stake in the good times continuing. Rogol, who had once worked for the consulting firm McKinsey, had often expressed a bullish view of the industry’s prospects.
In a bid to counter the rising skepticism about its technology, Timminco invited Rogol to visit Bécancour. Rogol toured the plant for a day in May, 2008, and produced a glowing report that predicted Timminco and its new process had “potential for massive growth and, possibly, for reshaping industry.”
Prefaced by the caveat that it was only a “preliminary assessment,” Rogol’s report predicted that Timminco could potentially produce up to 10,000 tons of solar-grade silicon in 2009 and as much as 20,000 tons in 2010. With a potential selling price of between $45 and $65 a kilogram, and production costs of between $13 and $22 a kilogram, Timminco was poised for a 2010 operating profit of between $270-million and $1-billion, Rogol’s report breathlessly forecast.
But while the company was in defensive mode, its story was still holding up with investors. Timminco’s stock peaked on June 5, 2008, touching $35.69 and giving the once-sleepy company a market value of more than $3.5-billion.
May was also the month that Sprott Inc. launched its IPO, allowing Eric Sprott to sell part of his 78 per cent stake in the firm that he founded. There is little doubt that Sprott’s massive stake in high-flying Timminco shares helped generate enthusiasm for the offering. Although Sprott claimed the IPO was dogged by short sellers, the share sale placed a $1.5-billion value on the company, making Sprott a billionaire on paper.
Just half a year later, by late November, however, Timminco shares had nose-dived to a mere $2.75. Although the stock would show occasional faint signs of recovery over the next year, it was the beginning of a death spiral for Timminco. It all happened very quickly.
The first setback came on Aug. 12. Timminco disclosed that it had run into contamination problems with some of its solar-grade silicon and had shipped just 221 tonnes during its second quarter, well below forecasts of 300 tonnes. Timminco’s target of producing 2,000 tonnes of solar-grade silicon in 2008 was now seriously in doubt. The stock skidded 24 per cent in one day, closing at $15.10. In Bécancour, Boisvert lashed out at short sellers. “They are having a field day. I hope they enjoy themselves, because this is very short-term thinking,” he said.
To make matters worse, The Globe and Mail reported that Tardif had reduced his holdings in Timminco from 4 per cent of his portfolio to just 0.6 per cent. “I sold most of my stuff on the way up and that’s my style,” Tardif said at the time. “I sold some in the low $20s, mid-$20s, high $20s, and the $30s...because my strategy is always to put the most money in my best idea in terms of risk-reward today.”