Are the Bears Wrong on SUNE Stock?
SunEdison, Inc. (NYSE:SUNE) stock is shooting through the roof. With renewed interest on renewable energy from the United Nations COP21 summit in Paris and the amended deal to acquire Vivint Solar, Inc. (NYSE:VSLR), SUNE stock is giving its short sellers a hard time indeed.
So what happened at the COP21 summit in Paris? Well, 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. Also, every country agreed to come up with a carbon reduction plan and renew it every five years. Moreover, rich countries provide $100 billion a year in climate finance for developing countries by 2020, with a commitment to further finance in the future. (Source: “2 Degrees, $100 Billion: The World Climate Agreement, By The Numbers,” NPR, December 12, 2015.)
The agreement reached at the conference is going to bring increased popularity to renewable energy, including wind and solar. Since SunEdison is a major player in the renewable energy sector, investors are taking a new look at the company.
Another piece of good news for investors of SunEdison stock is that the company is restructuring its acquisition deal with Vivint Solar, a residential solar system company. In July, SunEdison agreed to buy VSLR for approximately $1.9 billion in cash, stock, and notes. The deal was valued at $2.2 billion, including debt.
After the deal was announced, investors expressed concerns that the company might be paying too much cash. SunEdison listened, and announced last week that its planned deal for acquiring Vivint has been amended; the cash portion has been reduced and Blackstone Group LP will provide a $250 million credit facility to fund business growth. (Source: “SunEdison And Vivint Solar Reach Agreement To Amend Definitive Merger Agreement To Acquire Vivint Solar; Blackstone-Sponsored Vehicle To Become Key Stakeholder And Commits To Provide $250 Million Credit Facility,” SunEdison, Inc. Investors web site, December 9, 2015.)
Under the amendment, the cash portion of the deal is reduced by $2.00 per share, while the stock consideration is increased by $0.75 per share. SunEdison’s CEO, Ahmad Chatila, said, “Given the recent market volatility, we believe the modified agreement is in the best interest of all parties. In addition, we are also delighted to add the Blackstone team as a key new stakeholder and partner.” (Source: Ibid.)
The Bottom Line on SUNE Stock
The influx of good news might have made short sellers a bit nervous. In the past several months, short interest on SUNE stock has increased substantially, as the SUNE stock price tanked.
On June 30, short interest stood at 69,841,546. By November 30, short interest had surged to 119,305,248. As a percentage of the float, short interest rose from 26.25% to 44.83% during this period. (Source: “SunEdison Inc. Short Interest,” NASDAQ web site, last accessed December 16, 2015.)
Note that those who shorted SunEdison stock will eventually have to cover their positions. If more good news comes or the upward momentum in SunEdison’s stock price continues, there could be another short squeeze.