Bad News for SUNE Stock
SunEdison Inc (NYSE:SUNE) stock suffered further on Wednesday, giving up 17% after Axiom Capital Management Inc. lowered its price target amid chatter that the struggling solar company is just one step closer to bankruptcy.
SUNE stock dropped to as low as $1.24 in New York on Wednesday after closing down 26% at $1.49 on Tuesday. The shares have already lost 94% since they reached a five-year high of above $31.00 as the company came under pressure while trying to grow quickly via acquisitions.
Axiom Capital’s analyst Gordon Johnson, who maintained his “Sell” rating on the stock, lowered his 2016 year-end price target to $0.22 a share, compared to his previous target price of $0.39 a share.
“Should SUNE be forced to liquidate projects out of its 5.5GW backlog in a Bankruptcy, the impact to US solar market project fundamentals (incl. rooftop) could be detrimental,” he wrote in a note to investors. (Source: “SunEdison Plummets On Imminent Bankruptcy; Axiom Sees “The Beginning Of The End” And 85% More Downside,” Zerohedge, March 23, 2016.)
However, Johnson advised short sellers to be cautious with the volatile stock and pointed to five possible bullish catalysts that could blow up a SUNE stock short. (Source: “5 Upside Risks To A Sunedison Short,” Benzinga, March 23, 2016.)
Citing two people familiar with the matter, Debtwire on Tuesday reported the Maryland Heights, Missouri-based renewable energy provider is in debtor-in-possession (DIP) negotiations over SunEdison’s debt. The talks have focused on providing the company with about $300 million in new liquidity, Debtwire reported. (Source: “SunEdison engages in DIP talks with second lien holders,” Debtwire, March 22, 2016.)
“DIP negotiation means that the company has effectively run out of cash and they get to pay their creditors ‘fair market value’ for the secured assets versus the contracted value,” Johnson told Reuters. (Source: “SunEdison in debtor-in-possession financing talks: Debtwire,” Reuters, March 22, 2016.)
The talks follow unsuccessful attempts by second-lien lenders to reach an out-of-court solution for the company’s cash shortage and debt issues. The investor group includes those holding term loans of a total of $725 million, Debtwire reported. SunEdison had outstanding debt of $11.67 billion and cash and cash equivalents of $2.39 billion as of September 30, according to Reuters.
Earlier this month, Avondale Partners downgraded its rating on SUNE stock to “Market Perform” from “Market Outperform,” Stifel Nicolaus terminated its “Hold” rating, while JPMorgan Chase & Co. downgraded the stock to “Underweight.” (Source: Benzinga, op cit.) SUNE stock also received downgrades this month from Macquarie Group, Needham & Company, and Oppenheimer & Co.