SunEdison Stock Shoots Through the Roof
SunEdison Inc (NASDAQ:SUNE) has been buried under an avalanche of bad news for the last seven months. The endless sequence of screw-ups drove SUNE stock from $31.55 to a low of $1.25. But after all that pain, shareholders finally got a piece of good news.
For several weeks, the fate of SunEdison hung on a single court case. The company was being sued by a billionaire named David Tepper. Tepper runs a hedge fund named Appaloosa Management, which holds a sizeable stake in TerraForm Power Inc (NASDAQ:TERP), a yieldco of SunEdison. (Source: “SunEdison’s Shares Soar, Again, On Good News,” Fortune, February 26, 2016.)
Tepper was upset over the deal to buy Vivint Solar Inc (NYSE:VSLR). At a time when solar stocks were crashing across the board, SunEdison decided to buy the second-largest player in residential solar. It was an expensive purchase that was high-risk, high-reward.
As a yieldco, TerraForm Power inherits a lot of SunEdison’s projects after they are already developed. TerraForm simply operates the plant and passes profits through to shareholders. But the Vivint deal was slightly different.
TerraForm Power would have to chip in $799 million for the Vivint acquisition. Tepper and his fellow shareholders weren’t too happy about that, so they filed an injunction to block that particular segment of the deal.
It would have been a deadly blow to SUNE stock if the company lost this case. SunEdison was continually hammered by the markets, as pessimism mounted over the decision. But on Thursday, February 25, the company emerged victorious.
It was a small step in the long road to recovery, but an important one for SUNE stock. Vivint came out after the hearing and confirmed the sale was still on track. The stock rose 52%, as investors breathed a sigh of relief.
I can’t emphasize how important this moment is for SunEdison. Everything the company has done in the last few months hovered under the shadow of this lawsuit. Now that management has earned themselves some wiggle room, they could potentially make use of the assets at their disposal.
However, don’t expect the company to suddenly move into the black. SunEdison needs to lay off the acquisitions binge for a while and focus on cutting its growing losses. There are certainly reasons to stay wary, but I’m going to keep a close eye on SUNE stock over the coming months.
I wouldn’t be surprised if SunEdison turns out to be a breakout stock of 2016.