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Thursday, October 22, 2020

Sunedison Inc (OTCMKTS:SUNEQ) Under the Microscope

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Sunedison Inc (OTCMKTS:SUNEQ) is a stock we are covering closely. The action continues to be wide-ranging and intense following the huge squeeze that got traction last week. As we noted there, the spur for the big bout of covering among the 40% of the float caught short seemed clearly to be about the move to threaten bridged ownership of the TERP position through the restructuring process.

As you know, SunEdison is in Chapter 11 bankruptcy, as one of the biggest and most prominent BKs of 2015. That process almost always ends up with a complete wipe-out of all common equity ownership through an eventual canceling of shares. That’s why you can end up with such a massive short position in something like shares of SUNEQ stock. It’s not uncommon. However, it’s also why even a whisper of a continuity in value for common shares of the outgoing cap table can cause such a stir.

Sunedison Inc (OTCMKTS:SUNEQ) frames itself as a company that develops, finances, installs, owns, and operates renewable power plants to residential, commercial, government, and utility customers.

It operates through Renewable Energy Development, TerraForm Power, and TerraForm Global segments.

The Renewable Energy Development segment provides renewable energy services that integrate the design, installation, financing, monitoring, operations, and maintenance portions of the renewable energy industry segment.

The TerraForm Power segment owns and operates clean power generation assets that sell electricity through long-term PPAs to utility, commercial, and residential customers based in the Organization for Economic Co-operation and Development (OECD) member countries, such as the United States, the United Kingdom, Canada, and Chile.

The TerraForm Global segment owns and operates clean power generation assets that sell electricity through long-term PPAs to utility and commercial customers based in specified emerging market countries located in Asia, Africa, Latin America, and the Middle East.

The company was formerly known as MEMC Electronic Materials, Inc. and changed its name to SunEdison, Inc. in May 2013. SunEdison, Inc. was founded in 1984 and is headquartered in Maryland Heights, Missouri.

On April 21, 2016, SunEdison, Inc. along with its affiliates, filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York.

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At this point, while short interest remains likely pretty high, and we do see some potential for at least a spirited contest in bankruptcy court where the TERP position is concerned, traders and investors should also take note of the Company’s most recent 8K filing, appearing on Wednesday:

“On October 5, SunEdison, Inc. (the “Company”) received a notice that the United States Securities and Exchange Commission (the “SEC”) is conducting a non-public, fact-finding investigation relating to the Company. The notice was accompanied by a subpoena, seeking production of certain emails and other electronic communications sent or received by certain current and/or former directors and/or officers of the Company, TerraForm Power, Inc. and/or TerraForm Global, Inc. As previously disclosed in the Form 8-K dated March 31, 2016, the Company previously had received a non-public, informal inquiry from the SEC. In addition, the Company has received subpoenas from the United States Department of Justice (the “DOJ”) seeking information and documentation relating to various matters. The Company and the board of directors intend to continue to cooperate fully with the SEC and the DOJ.”

It could turn out to be nothing. But, it’s out there.

Gauge your risk accordingly if you are an interested prospective participant in this story. Otherwise, there are some interesting dynamics, but a little context should also be appreciated. As noted above, the Company is in chapter 11. As part of that case, the Company commenced a marketing process for its assets led by Rothschild Inc.

Earning a current market cap value of $26.7M, shares of SUNEQ stock are caught in a roller coaster of viable yet conflicting ideas, with the balance sheet fatally wounded, but non-marginal odds of some serious risk for shorts in this equation. As of June 24, 2016, the Company received approximately 100 non-binding bids and indications of interest for its various business lines and all of its assets. As of June 24, 2016, an illustrative “sum of the parts” analysis based on these non-binding bids and indications of interest was provided to certain debt holders demonstrating a range of approximately $1.25 bln to $1.7 bln for total gross proceeds for such asset sales and subject to various contingencies, including diligence conditions and contingent earn-out consideration. For continuing coverage on $SUNEQ, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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