By contrast, Environmental Finance’s IPO of the Year STR Holdings has defied the rocky markets to deliver 100% returns for investors since its listing on the New York Stock Exchange in November 2009, when it raised around $120 million.

STR floated at $10 a share, below its expected price range of $13–15. However, its star has soared considerably, with prices trading around $20 a share in early July – and reaching a high of $25.20 in March.

The solar encapsulant manufacturer sits at an attractive spot in the solar supply-chain, allowing the business to grow and generate profits even at a challenging time for the wider solar market.

Barry Morris, STR Holdings: not locked in to any one technology

Founded in 1944 as a plastics developer, by the time of flotation, STR, or Specialised Technology Resources, earned more than 50% of revenues from making solar encapsulants – a small but important component for manufacturers of solar panels. “We’re not locked in to either of the leading technologies, silicon or thin film. And, as the market leader, we are selling our product to just about every major player that’s making solar panels,” says Barry Morris, executive vice-president of the Enfield, Connecticut-based firm, explaining one of the reasons the firm has proved popular with investors – and sustained returns desp ite inclement financial conditions.

“STR is a great macro play on solar, as the company sells to all of the top producers across all of the technologies.” notes Brian Bolster, managing director in the clean-tech and renewables group at Goldman Sachs in New York, one of the underwriters and bookrunners on the deal. “In addition, while return on capital varies for many solar manufacturers, STR has consistently posted a great return on capital, with strong margins.”

Deciding on the timing for the flotation was a tricky business. STR Holdings first filed its intention to list with the US Securities and Exchange Commission around July 2008, two months before Lehman Brothers’ collapse. The listing was postponed as the credit crunch hit and financial markets closed down. At the same time, price-to-earnings ratios for a basket of solar stocks tracked to help price the IPO fell from around 17 times to around 9.5 times. “We were on-again, off-again,” explains Morris, as conditions appeared to improve then recede.

STR Holdings filed again in the fall of 2009, but the climate for the IPO was still uncertain. “This was a very challenging time, this was really the first solar-related initial public offering [IPO] that came in almost 18 months,” observes New York-based Credit Suisse banker Sanjeev Chaurasia, the deal’s bookrunner.

Funds raised for the company from the IPO went partially to pay down debt, but also to ramp up production at the firm’s factory in Malaysia and increase capacity elsewhere in Asia. Private equity firm DLJ Merchant Banking Partners, which bought a 55% stake in STR Holdings in June 2007, partially exited at the IPO but remains invested – as is company management, notes Morris.

Concludes Bolster: “The market is always going to be open for a good company that has a good a defensible business plan.”

RUNNER-UP: Duoyuan Global Water

Duoyuan Global Water’s (DGW’s) entry to the New York Stock Exchange in June 2009 was heralded by investors as a rare opportunity to gain exposure to the burgeoning domestic demand for clean water infrastructure in China.

Built from the ground up by extraordinary entrepreneur Wenhua Guo, DGW is poised to take advantage of the growing domestic demand for its advanced water treatment technologies, as China takes measures to cope with growing demand stimulated by urbanisation, industrial growth and water pollution.

Strong management and the healthy profitability of this key player in the Chinese water market cemented the reputation with investors of Environmental Finance’s runner-up in the IPO category. DGW reported a 37.4% year-on-year rise in profits in the first quarter of 2010, to RMB74.9 million ($711 million).

Tapping into China’s growing demand for water infrastructure, this IPO on the NYSE stormed home at a risky time for the public markets, raising $88 million. Supplying the domestic Chinese market, DGW was an unusual proposition for US investors more used to Chinese firms oriented to exports – and some education was required during the roadshow, according to those close to the deal.

“The company really succeeded on the strength of the story – and the strength of the company itself,” says James Castanino, vice-president of Global Environment Fund, a private equity fund which first invested in the water treatment equipment supplier in February 2008.

Chairman and chief executive Guo founded the company in 1989, and built the business up by reinvesting profits, with no outside investment. Since listing at $16 the share price shot up to a high of $44 and was trading around $18 in mid July.

“They were one of the first IPOs out after the meltdown,” notes Chris McCabe, at bookrunner Piper Jaffray. “That was not a market into which you would want to take a B+ or a C+ rated company.”