TOYO follow-up: I went back through the filings after the comments. Here’s what I found.

TOYO follow-up: I went back through the filings after the comments. Here’s what I found. A few weeks ago I posted my TOYO thesis here and asked what I was missing: [Original post](https://www.reddit.com/r/ValueInvesting/comments/1vwdn9h/toyo_what_am_i_missing/) Full disclosure: since writing the original post, I’ve started accumulating a fairly large position in TOYO. So I’m no longer looking at this as a neutral observer and I obviously have skin in the game. I’m still trying to stress-test the thesis rather than talk myself into it, which is why I’m posting the follow-up here. The comments sent me down a few rabbit holes, especially around related parties, Abalance, the 2024 earnings, dilution and governance. I went back through the filings rather than trying to defend the original thesis. Some of the criticism was right. A few things also look better than I thought. This is mostly stuff I either missed the first time or that has happened since. The related-party issue was probably the criticism I took most seriously. TOYO historically did a huge amount of business inside the VSUN/Abalance ecosystem. That deserves a discount. But H1 2026 looks quite different. Out of $261M of H1 revenue, $57.5M came from related parties and about $203.5M came from third parties. So roughly 78% of H1 revenue was third-party business. Related-party accounts receivable were also zero at June 30. The supplier side moved in the same direction. TOYO bought about $39.8M of raw materials from related parties in H1 2025. In H1 2026 that was down to about $7.45M, an 81% decline. That doesn’t remove the governance problem. The historical relationships and control structure still matter. But the idea that most of the current business is just money moving around related companies is getting harder to reconcile with the latest numbers. The old going-concern warning also changed. At March 31 TOYO had a $97.1M working-capital deficit. By June 30 working capital was positive $29.8M. Management now says the conditions that previously created substantial doubt about the company’s ability to continue as a going concern have been resolved for at least the following 12 months. I wouldn’t pretend operations alone fixed that. Extending the VSUN loan and moving roughly $51M out of current liabilities helped materially. The equity raises helped too. Positive earnings and operating cash flow were part of the improvement, but refinancing and dilution were part of it as well. Another commenter was right about 2024 earnings. TOYO reported about $40.5M of net income in 2024, but roughly $35.1M came from a non-cash fair-value change in contingent consideration. So I would not use 2024 net income as evidence of sustainable earning power. But that accounting gain doesn’t explain the current numbers. H1 2026 produced $58.8M of operating income, $45.8M of net income and $61.4M of operating cash flow. The recent earnings are operating earnings, not another $35M fair-value gain. I also missed the First Solar case in the original post. First Solar filed a Section 337 complaint at the ITC alleging that TOYO and others imported certain TOPCon products that infringe its patents and is seeking exclusion and cease-and-desist remedies. There hasn’t been a merits determination yet, and TOYO has said its products have continued to be imported and sold while the case is pending. Still, it’s a legitimate additional risk and should have been in the original bear case. Then Abalance got delisted. On Aug. 25 the Tokyo Stock Exchange decided to delist Abalance on Sept. 26 over internal-control, group-governance and related-party-transaction failures. Given TOYO’s history with the same ecosystem, I think that absolutely deserves to increase the governance discount applied to TOYO. What I don’t think automatically follows is that Abalance being delisted means TOYO’s operating business is fake or insolvent. Those are different claims. TOYO is separately Nasdaq-listed, has its own filings and operating assets, and the latest financials show a substantial third-party business. Something else happened immediately after that. On Sept. 1, TOYO and VSUN amended their trademark arrangement. VSUN can continue using the VSUN trademarks outside the U.S., but from Sept. 12 it can no longer use them in the United States. TOYO keeps the U.S. rights. A trademark agreement obviously doesn’t solve Commerce, CBP or governance. But directionally, TOYO is clearly carving out the U.S. business for itself while keeping VSUN focused outside the U.S. That fits pretty neatly with the Texas strategy. There is also one dilution detail I had wrong before. The 90-day restriction around the June offering does not completely prevent TOYO from using its existing ATM. The offering documents specifically carve out the existing ATM as an exception. So dilution before late September is not impossible. This is still one of the biggest risks in the whole thesis because TOYO is planning a roughly $357M Texas cell plant while the company’s equity value is only a fraction of that. The key question is whether they can fund a meaningful portion of Texas through project financing, strategic capital, internally generated cash and potentially 45X monetization rather than repeatedly issuing common stock at depressed prices. That still isn’t answered. Management has also started spending noticeably more time around capital markets. Rhone Resch represented TOYO at the Jefferies Renewables conference on Sept. 10, including a fireside chat and meetings with institutional investors. I haven’t seen any major announcement come out of Jefferies, so I’m not treating the conference itself as a catalyst. What interests me is that TOYO is finally putting the U.S. story directly in front of institutions. Next is the Japan Go IPO Summit on Sept. 16. CEO Takahiko Onozuka and CFO Yasunari Harada are both involved. Harada has more than 30 years of banking and capital-markets experience, including Morgan Stanley, BNP Paribas and Société Générale. I’m not saying that means a financing deal is coming. But when one of the biggest unanswered questions is how they fund the U.S. expansion, I think it’s worth paying attention to who management is suddenly spending time with. There is also a new short-interest angle that wasn’t part of my original thesis. Short interest increased from about 2.72M shares on Aug. 14 to 3.97M shares on Aug. 31. That’s roughly 1.25M additional shares short in two weeks, or about a 46% increase. I don’t consider that automatically bullish. It means bears got materially more confident during the crash and they may be right. But it changes the mechanics if the thesis starts working. You now have a large short position, relatively thin normal trading volume, price trying to form a base and several identifiable catalysts ahead. If a real catalyst brings buyers and the stock breaks resistance on volume, short covering could amplify an ordinary rebound. That’s not a reason to buy the company by itself. It’s just potentially important if the fundamentals finally give the market a reason to reprice it. So where am I now? The comments didn’t make me abandon the thesis. They changed what I think the thesis actually is. I’m less interested in saying “TOYO is 2x earnings, therefore it’s cheap.” That’s too simplistic. The actual question is whether TOYO can take a profitable solar business that is still tangled up in an ugly old corporate structure and turn it into a genuinely independent U.S.-focused manufacturer before regulation, financing or governance damages the equity story. Since my original post, both sides have gotten stronger. The bear case now includes Abalance’s delisting, the First Solar case, the still-open ATM, Commerce/CBP uncertainty and the enormous cost of the Texas buildout. The bull case now includes roughly 78% third-party H1 revenue, sharply lower related-party sourcing, zero related-party receivables, positive working capital, current earnings that aren’t dependent on the 2024 accounting gain, clearer separation between TOYO’s U.S. business and VSUN, Texas still moving forward, management getting in front of institutional and capital-market investors, and almost 4M shares short if something actually breaks right. I’ve accumulated a large position because, at current prices, I think the upside if TOYO executes outweighs the risks. But it’s still a high-risk position, and I’m actively looking for reasons the thesis could be wrong. I think the setup is more interesting now than when I wrote the first post. The market is pricing this like a lot has to go wrong. At this point, I’m more interested in what happens if one or two important things go right. What am I still missing?