This Could Put a Bottom Under SUNE Stock
There is no other way to put it: the recent months have been terrible for SunEdison, Inc. (NYSE:SUNE) stock. Since its peak at $32.13 on June 23 of this year, SunEdison shares have been plunging. By early December, SUNE stock was trading at $3.78 per share, meaning it lost 88.2% of its value in a little more than five months. However, SUNE’s stock price surged 5.88% on Thursday, December 3, when the market actually slipped.
For those not familiar with the company, SunEdison, Inc. is a global renewable energy company headquartered in the U.S. The company develops, installs, owns, and operates solar powerplants and wind energy plants around the globe. It is also one of the world’s largest renewable energy asset managers.
So, why did SunEdison’s stock price climb up on a day when the market was deep in the red? Well, the answer is quite simple: the company announced that it would cancel its agreement to acquire a stake in Brazilian renewable energy company Renova. (Source: “SunEdison, TerraForm Global, and Renova Energia Terminate Previously Announced Transactions,” SunEdison, Inc., December 2, 2015.)
Under the deal, SunEdison was to buy an approximate 16% stake in Renova for $250 million. Also, TerraForm Global, Inc. (NASDAQ:GLBL), a yeildco of SunEdison, was to take control of power generation assets from Renova in a share swap valued at approximately $3.45 billion.
SunEdison called off the deal due to adverse local market conditions. In Brazil, companies building new powerplants are suffering from high financing costs at private banks and reduced availability of lower-cost, government-backed credit.
Calling off the deal is believed to be the right decision for SunEdison. This is because if the company were to have gone through with the deal, there would be a massive dilution of SunEdison’s shares. Also, according to Credit Suisse analysts, “Per disclosure, this also extinguishes SUNE’s liability to acquire 2.5 GW of Renova’s backlog projects (total consideration of $4.0 billion for deliveries in 2017–2020).” (Source: “SunEdison and its YieldCos Jump on Deal Cancellation News,” Zacks, December 2, 2015.)
While the company has canceled this deal, SunEdison still has quite a few other deals to help its stock move forward. In November, SunEdison struck a deal with the San Diego government to quadruple the number of solar power installations in the city. (Source: “San Diego Ramping up Solar Power,” The San Diego Union Tribune, November 2, 2015.)
Also, in November, SunEdison signed a power purchase agreement with Bloomberg to power the company’s New York-based data center with 2.9 megawatts of solar energy. Needless to say, all of these factors could put a bottom under SUNE stock. (Source: “Bloomberg to Power New York Data Center with 2.9 Megawatts of SunEdison Solar,” SunEdison, Inc., November 2, 2015.)
The Bottom Line on SUNE Stock
Some hedge fund managers have also noticed the value in SunEdison. In the third quarter of 2015, billionaire hedge fund manager Steve Cohen of Point 72 Asset Management increased its stake in SUNE by 258% to 7.9 million shares, valued at approximately $56.7 million. During the same period, D.E. Shaw, another billionaire investor, increased his holding of SUNE by 58%, bringing his total shares to 2.674 million, valued at around $19.2 million. (Source: “Form 13F,” U.S. Securities & Exchange Commission, last accessed December 3, 2015.)
The company might have not done well in the past, but with the smart money building positions, SUNE stock may see a turnaround ahead.