With a ton of rumors surrounding it, SunEdison Inc (NYSE:SUNE) stock has been on a steady climb in the past several trading sessions.
The company made the rumor official on Wednesday, January 17 and SunEdison’s stock price popped again. So what was the decision? And why could it have such a huge impact on the company?
This Is Bullish for SUNE Stock
SunEdison’s big announcement was to give a board seat to Greenlight Capital, a hedge fund run by billionaire investor David Einhorn. According to the press release, SunEdison has appointed Claire Gogel, a former partner at Greenlight Capital, as an independent director effective immediately. (Source: “SunEdison and Greenlight Capital Agree to Corporate Governance Initiatives,” SunEdison Inc, January 27, 2016.)
To be honest, the announcement didn’t exactly come as a surprise, given the substantial stake David Einhorn’s hedge fund had in the company. According to SUNE stock’s most recent filing with the Securities & Exchange Commission (SEC), Einhorn had a 6.8% stake in SunEdison. Moreover, Einhorn had been in talks with SunEdison about gaining a board seat. (Source: “Schedule 13D,” Securities & Exchange Commission, January 26, 2016.)
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For those not in the know, David Einhorn earned his fame in the stock market for shorting Allied Capital, Lehman Brothers, and Green Mountain Coffee Roasters.
Einhorn is also an activist investor. He even filed a lawsuit against Apple Inc. (NASDAQ:AAPL) in the past and demanded a bigger piece of Apple’s giant cash pile be paid out to shareholders. Several months later, Apple did increase its dividends and also announced a more aggressive share buyback program.
So, what could Einhorn do to help SunEdison? Well, as it turns out, changes are already happening.
Other than offering Greenlight Capital a board seat, SunEdison also announced that the company will not issue any new equity without a supermajority vote of the board of directors. This is great news for holders of SUNE stock, because the agreement could limit potential dilution of the company’s shares.
While SunEdison’s stock price tanked big-time since its announcement to acquire Vivint Solar Inc (NYSE:VSLR) last summer, the industry’s outlook has become brighter.
The first piece of good news for the renewable energy industry came from the United Nations COP 21 Summit in Paris, where 196 countries signed an agreement to limit the rise in global mean temperatures to two degrees Celsius (3.6 degrees Fahrenheit) by the end of the century. Each country also agreed to come up with a carbon reduction plan and renew it every five years.
The results from the Paris conference might not seem concrete enough, but in the U.S., there was more good news.
Last month, Congress reached a deal to extend the 30% federal tax credit for those who install renewable energy systems in their homes and offices. A few days later, both the House of Representatives and the Senate passed the omnibus spending bill, which included an extension on subsidies to renewable energy.
The Bottom Line on SUNE Stock
The improved policy environment could lead to more projects for renewable energy companies like SunEdison. Moreover, with David Einhorn’s involvement, SUNE stock could start delivering value to shareholders.
All of which is extremely bullish for SunEdison Inc.