Is SunEdison Going down to $0?

2015 was a destructive year for SunEdison, as the stock price fell around 93 percent. 2016 doesn’t look any different for SunEdison either as the stock has already lost close to 70 percent of its value. SunEdison faced many problems in 2015 and still lingers to face trouble in 2016, which is why I think investors should avoid the stock. Growing debt and increasing losses may result in bankruptcy, which is why I think investors should avoid SunEdison.

Nearing bankruptcy

Recently, Latin America Power’s stockholders influenced a judge to limit SunEdison’s transactions, which may ultimately lead to the confiscation of $150 million in cash that they sense are outstanding after SunEdison strolled away from its contract to acquire the company.
This problem is the just the newest of SunEdison’s financial problems, and there is high chance that the company will be dragged into bankruptcy sometime this year.

Apart from the above-mentioned problem, the biggest thing to worry about is the acquisition of Vivint Solar, which may turn out to be the killing blow. TerraForm Power is assumed to acquire 523 MW of Vivint Solar’s operating resources for $799 million as a part of the acquisition. This would recompense for most of the minimum $840.6 million in cash payable to Vivint Solar for the acquisition.

The main problem is that David Tepper can take legal action to brick TerraForm Power’s part of that transaction, and if he is successful in doing so, then it would leave a $799 million hole in SunEdison’s books. The lawsuit could also avoid the accomplishment of $550 million in loans that are linked to the transaction and projected to offer some growth platform.

If Latin America Power or David Tepper  win the lawsuit, it could descend SunEdison even more rapidly. SunEdison may have stretched its limits too far and it looks unlikely that it will be able to handle the debt on its books as well as the threat posed by the lawsuits. For this reason, the chances of bankruptcy are really high for the company, and it would be wise for investors to avoid the stock right now.

Final Words

SunEdison is already a highly leveraged company and things may get worse for the company in the near future. Potential lawsuits may literally demolish SunEdison’s chances of survival as the company is already struggling to remain afloat. For these reasons, I think investors should avoid the stock and stay on the sidelines.
Published on Feb 22, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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