Einhorn Bullish on SUNE Stock
A slew of bad news has hit SunEdison Inc (NYSE:SUNE) beginning this year. The company is facing a fresh string of lawsuits. Meanwhile, SUNE stock is getting hammered on the back of bankruptcy speculations. Is there any hope left?
Bear with me as I lay out some good news.
Debt, debt, and more debt! That’s what’s been killing SunEdison. If you’ve been following, I’ve been saying it over and over. Restructuring is the only way SunEdison can salvage some of the stock’s lost value. Sheer mismanagement took this company from a more than $10.0-billion valuation to only $950 million within six months.
SunEdison is sinking in quicksand and time is running out.
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Amid all this negativity, there’s one good news piece that should provide investors some solace. A new board member might be able to pull SunEdison out from this ordeal.
One activist investor has jumped in to save SunEdison’s fate. This investor made it to the books of history for actively pushing Apple to payout more in dividends. He went so far as to demand a preferred stock from the tech giant.
I’m talking about billionaire hedge fund manager David Einhorn. He has long been pushing for a seat on SunEdison’s board and has finally made it there. One of his hedge fund partners from Greenlight Capital now holds a seat on the company’s board. Through her, he might be able to achieve what stockholders have long been yearning for. (Source: “SunEdison And Greenlight Capital Agree To Corporate Governance Initiatives,” SunEdison, January 27, 2016.)
Einhorn’s Greenlight Capital was one of the worst-performing hedge funds of 2015. Three of his big bets—Consol Energy, SunEdison, and Micron Technology—were huge disappointments. But Einhorn may now have a chance to recoup some of those losses.
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Now, SUNE stock has not traded so low in three years. That, too, was before Einhorn added the stock to his portfolio. Einhorn now holds a hefty six-percent stake in the company. For him to make money on his bet, he must push for a price higher than his cost. Needless to say, that price will be much higher than the stock’s current price.
Good news is that Einhorn is already on it!
Einhorn is not only pushing for a change in SunEdison’s senior management, but he is also pushing for the sale of some of its assets. The sale will help the company restructure by paying off some of its debt.
It’s also being reported that Einhorn might even be looking for an altogether sale of the company. If the company is able to become a solid acquisition target, the stock is bound to soar. (Source: “Einhorn’s Greenlight seeks sale of solar company SunEdison,” Reuters, January 27, 2016.)
The Bottom Line on SUNE Stock
SunEdison and its yieldcos are now facing numerous class action lawsuits. In question is SunEdison’s complicated relationship with the yieldcos and its hefty debt load.
The only thing that’s keeping SunEdison afloat is the fact that this debt is not due anytime soon; if it was, the company would have already gone bankrupt.
SunEdison’s move to take Einhorn on board has come as a blessing for SunEdison stock. The activist investor will likely help turn around the company this year.
Long story short: I’m seeing this to be defining moment for SUNE stock. If Einhorn succeeds, the stock could well take up its course heading northward.