SunEdison's Problems Aren't Over Yet

For the last few weeks, SunEdison (SUNE) has been a pretty volatile stock to own. The stock has fallen considerably since August and is currently trading just over $3. Understandably, many investors are betting on the company’s turnaround. The company recently decided to reduce its debt and the stock has staged an impressive recovery since touching its 52-week lows. However, SunEdison’s troubles aren’t over yet and the stock may continue its downward trajectory.

Debt is still burden

SunEdison is taking various steps to get rid of its debt.
Recently, the company exchanged a significant amount of debt for equity which resulted in a massive drop in stock price. More precisely, the company broadcasted that it grabbed on $725 million in new term loans and is diluting its equity to compensate for its debt.

Over the prior few years, SunEdison has created one of the most distinct renewable energy business in the industry. The company comprises of various large businesses such as utility scale solar, wind energy, and distributed solar. With all these businesses in mind, one can think that SunEdison can turn into the next-generation energy supermajor. However, the company’s large debt is brutally threatening this vision. The acquisitions splurge by the company throughout the previous few quarters has only degraded its financial condition, which seems to be on the edge of disaster.

The company’s continuously escalating financial concerns have forced the company to re-evaluate its business model. In recent months, the company has considerably cut down on its renewable energy functions in pursuance of adjusting to the new certainties. SunEdison also plans to sell 333 MW of wind plants and has void its $250 million deal with Renova. Despite all the current operations, the company still has too many issue to sort out. SunEdison even appears to be indirectly admitting that its ruthless model may not work out considering recent management alterations.

Given the amount of money SunEdison has wasted, betting on the company’s turnaround looks like a risky move especially in the present market condition.


While I do believe that the future is bright for renewable energy sources, SunEdison is a highly leveraged company and not a stock that investors should hold in the present market conditions. Unless the company reduces its debt significantly, I think investors should stay on the sidelines. Betting on SunEdison’s turnaround now is a risky investment idea.
Published on Jan 19, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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