First Solar CEO Michael Ahearn has unloaded half of his shares in the thin-film solar darling, a move that some industry watchers have said could signal trouble ahead. 

Ahearn, the second-largest shareholder in First Solar, has sold about 3.03 million shares since the Tempe, Ariz., company went public in November of 2006. In fact, he raked in $257 million since February, according to a series of filings with the U.S. Securities and Exchange Commission. 

The news comes at a time when the business could face serious setbacks in Europe, its largest market. Shares of First Solar dropped 4.85 percent to $254.56 per share in recent trading.

While Ahearn’s move has given investors pause, it has not been enough to change their outlook. Wall Street analysts continue to embrace First Solar, which has seen its stock soar faster than other companies in the solar panel field. 

“It’s normal for insiders to cash out holdings to diversify their assets,” said Kevin Calabrese, director of small cap research at Argus Research. “It could be an issue if it’s a constant selling of shares and causes a dilution of the shares.”

The pending decision by the German government to reduce solar energy subsidies as well as the possibility of banning the use of cadmium in solar products sold in Europe pose greater risks for First Solar, said Jesse W. Pichel, an analyst for Piper Jaffray. 

The company coats glass with cadmium telluride to generate solar power without using costly silicon. Silicon-based panels can convert more of the sunlight that hits them into electricity, but the price of silicon has grown as the materials have been in shortage. 

The European Union has banned the use of cadmium in batteries and some electronic devices, which could prove an obstacle, analysts said.

But Pichel said the German solar subsidy issue is more concerning. The German Parliament is considering a deal this week that would reduce the rate paid to solar-electricity generators by 10 percent in 2009, 7 percent in 2010 and 8 percent in 2011 (see German Solar Subsidies to Fall Less Than Forecast). 

Solar companies have been on tenterhooks for months as some politicians, arguing that the booming solar industry no longer needs the government’s help, have advocated a larger 30 percent reduction. The tariff has been key to making Germany the largest solar market in the world, so the final decision will affect not only First Solar, but the entire industry.

“The opposition to lower subsidies basically failed and that’s an overwhelming positive for solar,” said Jesse W. Pichel, an analyst for Piper Jaffray, referring to the agreement being debated this week. “First Solar is the best solution for Germany because it offers the lowest cost per kilowatt hour.”

He expects First Solar to do well this year. The company’s Malaysian plant is scheduled to begin production in the second quarter, and the company is making progress on improving its panels’ efficiency to 12 percent from 10 percent, Pichel said. 

First Solar generated $196.9 m illion in revenue for the first quarter this year, nearly doubling its revenue of $66.9 million from the same period a year ago. Its net income shot up to $46.6 million, or $0.57 per share, from $5 million, or $0.07 per share from first quarter in 2007.