Good Signs for SUNE Stock
The ongoing war between David Tepper and SunEdison Inc (NYSE:SUNE) has caused damage on both sides. Tepper’s lawsuit was a critical factor in the near-fatal destruction of SUNE stock, but it looks like the company is finally on the rebound.
And it’s not like Tepper got out of this unscathed. He is a major shareholder in TerraForm Power Inc, whose stock is down almost 48% in the last six months.
For those who are unfamiliar with this story, TerraForm is one of SunEdison’s yieldcos (a subsidiary that’s designed to buy completed projects from its parent company). It is supposed to cough up $799 million for SunEdison’s acquisition of Vivint Solar Inc.
Tepper absolutely hates that deal. He thinks SunEdison overstepped its legal authority by involving TerraForm as part of the financing, so he sued them. His argument is that the deal isn’t fair to TerraForm Power.
The shadow of this lawsuit has hung over SunEdison for some time. It’s driven a lot of capital away from the stock and smeared the firm’s name. But then something incredible happened: David Tepper lost his lawsuit.
A Delaware County Court denied his request to block TerraForm’s inclusion in the deal. Soon after, Vivint Solar shareholders accepted the tender offer. SunEdison stock shot through the roof. It seemed like all things were returning to balance.
Isn’t that nice? Apparently not if your name is David Tepper. Even though a court of law denied his injunction request, Tepper decided he would keep pushing forward on the legal front. He is fast tracking the court case using a new angle. (Source: “David Tepper Is Continuing His Lawsuit With SunEdison,” Fortune, February 29, 2016.)
But there’s some evidence that SunEdison is confident of a win. Close observers of the company may have noticed a minor shuffle in its upper management. And by “minor,” I mean the company has a new CFO. Where did the old one go?
Oh, no big deal, but he’s staying on as CEO of TerraForm Power and TerraForm Global. (Source: “Form 8-K for SunEdison Inc.,” Securities and Exchange Commission, March 11, 2016.) Basically, the guy who was integral to the financing structure of the Vivint acquisition is now going to be the head of both yieldcos.
I see this as a strategic move to tighten the relationship between the yieldcos and SunEdison. It would be much harder for Tepper to make his case if the structural relationship between SunEdison and its yieldcos changes.
It’s clear the firm’s big victory has given SUNE stock enough space to fight back against Tepper.