Solyndra Bankrupt: $525M TaxPayer Money Goes Poof

What would you say if the Federal government handed out $535 million to a solar panel company only to see it go bankrupt 2 years later?

If you are someone who cares about where your tax dollars go, you'll be perturbed. If you are a former employee of said company, you'd be angry.

Solyndra, of Fremont, California just up the road from me, said today that it was going kaput and will be laying off 1100 employees in preparation for Chapter 11 bankruptcy proceedings. The Department of Energy, who made investments in Solyndra, said that the company went out of business because of competition from Chinese manufacturers who were selling less expensive solar panels.

On March 2009 the company was the first to receive a US Department of Energy (DOE) loan from the Energy Policy Act of 2005. This law was signed into effect by President George W. Bush in August 2005. Its purpose was to provide loan guarantees for energy projects.

Solyndra would then apply to the program in 2006 and receive the $535 million loan towards funding of a new production facility in Fremont, California. Solyndra is believed to have received in total $1.5 billion in investments (including the DOE) to date. Goldman Sachs was the advisor to Solyndra with the DOE program.

In June 2010, the company backed out of a $300 million initial public offering. They cited adverse market conditions but this was likely after an audit determined the company was mired in debt and bleeding cash at a high run rate.

I recall the hype surrounding this company nearly two years ago when Senator Barbara Boxer, then California Governor Arnold Schwarzenegger, and US Department of Engery Steven Chu were there for the ground breaking. Then the hype was stepped up when President Barack Obama appeared a year later to take a tour of the factory and proclaim that this was all part of his green energy initiative and generation of new jobs.

Today, employees of the company were sent home packing with yellow envelopes. They received no compensation package. The very thing of creating jobs now leaves 1100 people without one.

Here was a Fed policy that burned $525 million of tax payers money without proper due diligence. A failure and one where venture capitalists and private investors got burned with no IPO to cash in. Notables included the George Kaiser Foundation which held 35% of the company and Madrone Partners which is affiliated with Walmart's Walton family.

All this when the product itself was unprofitable and uncompetitive against cheaper Chinese solar panel technology.

But lets face it, the solar energy industry has fallen flat and there is little interest out there in the investment community to support it.

About Kerry Kobashi

Kerry is the founder of KerryOnWorld. He lives in Silicon Valley and has worked as an engineer and project manager. He owns Kobashi Computing a consulting company.