If you’ve already eaten breakfast, don’t look at shares of American Superconductor Corporation (AMSC) today.
The provider of power technologies is down about 45% in the pre-market, after it disclosed last night that it’s biggest customer, a Chinese wind turbine company, abruptly canceled a huge order on the last day of the quarter.
According to a note from Wunderlich securities, the customer, Sinovel, accounts for 75% of AMSC’s revenue, and without any apparent explanation it literally rejected a huge delivery at the factory gate. It’s also begun a fight over passed payments it owed.
AMSC doesn’t believe there’s an issue with either Sinovel’s own finances or the Chinese wind market in general, which raises the possibility that Sinovel basically went for the most aggressive negogitating tactic imaginable — cancelling the order, watching AMSC’s share plunge, as revenue and expected cash receivables dry up, and then watching the supplier come crawling back.
Anyway, when you’re dealing with small companies that rely on one huge Chinese customer for the bulk of their revenue, caveat investor.