After an already spectacular crash on rumors of debt restructuring, SunEdison’s shares have tanked on news from the Wall Street Journal that the company will soon file for bankruptcy.
We reported last week that rumors SunEdison was in talks with holders of its second-lien loans to fund a debtor-in-possession financing facility had spooked investors, causing the company’s shares to tank 25% by the end of trading on Tuesday the 22nd. This was only the beginning, however, as news from the Wall Street Journal on Friday sent investors scurrying for cover. In after-hours trading, the company’s stocks fell another 25%, and started trading on Monday at between the $.20 and $.25 mark.
All in all, SunEdison’s shares have dropped a frightening 89.55% in just the last fortnight.
In response to the reaction from investors, Gordon Johnson, an analyst at Axiom Capital Management Inc., quoted by Bloomberg News, said that “The reaction last night was the right reaction,” adding that, if SunEdison files for bankruptcy, “the equity is worth significantly less than where it’s trading right now.”
To make matters worse — a phrase that SunEdison is likely beginning to get very sick of — the US Department of Justice has also initiated its own investigation (in addition to an internal investigation by SunEdison’s Audit Committee, and an external investigation by the US Securities Exchange Commission) into SunEdison’s failed acquisition of Vivint Solar. In a filing with the SEC on March 31, SunEdison notified that:
In addition, SunEdison’s own yieldco, TerraForm Global, has sued its parent company, filing a complaint against SunEdison as a whole, and SunEdison board executives Ahmad Chatila, Martin Truong, and Brian Wuebbels in the Court of Chancery of the State of Delaware. TerraForm Global has accused the company and its executive trio of “breach of fiduciary duty, breach of contract and unjust enrichment relating to the failure by SunEdison to transfer equity interests of certain renewable energy projects in India.”
But others within the solar industry hasten to add that SunEdison’s failure is not endemic of an industry wide issue. Conlan O’Leary, solar finance expert and CEO of Sighten, the leader in the solar software market, said:
“SunEdison’s situation is unfortunate and we hope that it can emerge from bankruptcy successfully. However, a negative outlook of the solar industry as a whole is misguided, as the fundamentals of distributed generation solar have never been better: electricity rates continue to rise and solar continues to get cheaper. Much of the recent turmoil can be attributed to a maturation and disaggregation of the solar value chain as capital and technology are democratized by new financing products and independent software tools. We’re seeing a more level playing field emerge and companies without a focused strategy and clear value proposition will face significant challenges.”