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It Will SUNE Be Over: Axiom Says SunEdison "Credit Event Appears More Likely", Sees Price Dropping To $2/Share
Back in the summer, SUNE was a hedge fund darling and in the portfolio of virtually every aggressive asset manager: a true hedge fund hotel.
Since then it has plunged by 90% on both concerns about fundamentals and hedge fund liquidations and margin calls. Just yesterday, the stock plunged another 34% beginning the question which hedge fund is still long and is about to get another major margin call.
In any event, as @the_real_fly says, "it will SUNE be over" and perhaps catalyzing the ending is a brand new note by Axiom Capital Research titled "The Nightmare Before Christmas” – Credit Event Appears More Likely than Presaged, in which the analyst Gordon Johnson sees at least another 33% of downside before the stock finally stabilizes at something resembling a fair value of $2.00
Here are the highlights:
- Credit Risk Appears Worse-than-Forebode. After some pressure from a number of SUNE pundits following our downgrade of the shares last week (given SUNE’s shrs had already moderated -75% vs. +1% for the S&P 500 over the same timeframe), we decided to do another “scrub” of the company’s 10-Q published 11/9. Following this exercise, we are even more resolute in our subdued outlook, SELL rating, and yr-end C16 PT of $2/shr (34% downside). Why? Five reasons, namely:
- (1) when excl. cash committed for construction projects, SUNE has just ~$600mn in cash for general corporate purposes (which we now blv may not be enough to sustain SUNE through 2Q16) – Ex. 2,
- (2) SUNE’s decision to borrow $169mn in 1yr paper from Goldman Sachs (GS; NR) in 3Q15 at a 15.4% interest rate (incl. $9mn prepayment) to put up collateral, we blv, for the 8/11/15 $152mn margin call on its $410mn Deutsche Bank (DB; NC) loan (an addtl. $91mn of collateral was required from SUNE 10/15 [Ex. 3], and we surmise more since then with the fall in Terraform Power’s shrs [TERP; NC]), pointing to emergency cash needs as recently as 3Q15 – who borrows 1yr paper at 15.4%?, (Ex. 4), other than a distressed company,
- (3) Renova’s right to put 7mn of GLBL shares to SUNE at a price of $15/shr 3/31/16 (a $105mn liability) – Ex. 5,
- (4) SUNE’s potential obligation to buy ~16% of Renova for $250mn using its own shares (i.e., 83mn shrs), suggesting sig. dilution to equity holders in the offing – Ex. 6, &
- (5) TERP’s recent revelation that it put up ~27% (i.e., $388mn) of the capital necessary to fund the Invenergy Warehouse, implying SUNE’s aspirations for ~$6bn in Warehouse funds to “house” its ~3GW in projects being developed may require a ~$1.65bn cash infusion (Ex. 7). Barring unforeseen incremental cheap funding in the offing, we see a credit event as likely before 3Q16.
- Valuation. Our yr-end C16 PT remains $2/shr (34% downside). While more valuation detail is below, with acute stress on its core biz at present, & shortcomings selling huge amounts of projects into the secondary mrkt over a short period of time thus far, we blv SUNE will miss ~3.5GW developed in C16. Using ([1.42GW × $0.18 (op. prof.) - $150mn interest × 70% (tax)] ÷ 316mn shrs) = $0.23/shr in dev. co. EPS, & applying a 9x P/E multiple (assumes 15% DevCo GM into perpetuity; likely high given 9.6% 2Q DevCo GM), SUNE is worth $2.
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Unpossible, we create money- Janet Yellen.
SUNE R.I.P. Slaughter of the muppet hedge funds who invested in SunEdison.
In any event, as @the_weight_pile_says, "it will SUNE be over" and perhaps catalyzing the ending is a brand new note by Pinnacle Penitentiary Research, titled "The Nightmare Before Rec' Time” – Punk Event Appears More Likely than Presaged, in which the analyst Fleece Johnson sees at least another 33% of upside before his stock finally stabilizes at something resembling a fair estimate of 12.00
one logic error here by the author...sune can issue new stock and buy it back with fed majgic money at zirp..the co will survive, management will get paid, what a wonderful FED world for the criminal ceo's of america.
After it goes titsup, who will own all the shit they have on other people's roofs? The Fed?
Never really understood the attraction of SUNE. Always seemed to be a sham.
My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... www.wallstreet34.com
solar doesnt work
http://www.utterpower.com/an-historic-note-will-ivanpagh-be-referenced-i...
You got that right...
Latest research report.
It will reach $2/share. Then, like a Phoenix, we mean Facebook, it will rise and reach $100/share.
Buying opportunity of a lifetime. Sell yourself, your wife, your kids and get in.
--Cramer & Gartman Inc.
"who borrows 1yr paper at 15.4%?, (Ex. 4), other than a distressed company,"
someone with good credit, visa mastercard and amex, offer credit at 20% plus..some cards 25%...
but yellen lets the banks take our money for zirp
credit card co's should be rolling in record profits this year.
But they will pay you 0.00000000000001% interest on your savings account. Assuming you have any savings.
Negative 8%, accounting for the inflation they lie about.
Will CDSs pay off on this one? Survey says!......... Bzzzzt! Oh, so sorry.
SUNEr or later, ... you'll own Generals.
Looking forward to BAC @ $2 Closed my account after 20+ years, what a lousy bank.
They deserve it
one of the few (and last) times I had CNBC channel on Sirius, Cramer said it was a steal around $12-13...lol
JUST FUCKING SELL SOME MOTHERFUCKING ASSETS, SUNE!
Maybe they can't because anyone doing due diligence on a potential purchase would discover the assets are worth much less than what they are listed on SUNE's books.
You'd think the guys loaning them money already did that DD
Keep an eye on their Yieldco, Terraform Global (GLBL)
Wow...JP Morgan really had my back covered on this one...hum..wonder who won on this deal..certainly not the general public...
JPM Storms Out In Defense Of The Sunny Hedge Fund Hotel: Initiates SunEdison With An "Overweight" And $24 Target
Tyler Durden on 08/31/2015 07:06
Not seeing the 15.4% in SUNE''s 10Q. Looks like a 9.25% second lien to me. Company still looks like an Enron-style shit show though!