August 25, 2015

SunEdison Stock Punished as Questions Linger on Vivint Solar Deal

Published by SNL on August 28, 2015. By Michael Copley


With SunEdison Inc.’s stock price cut in half three weeks after it said it would buy rooftop solar company Vivint Solar for $2.2 billion, Deutsche Bank Securities Inc. research analyst Vishal Shah in early August considered SunEdison’s options.

“There is no easy or direct way for SUNE to come out of the VSLR transaction,” Shah wrote in an investor note, referring to the companies by their ticker symbols. “Nevertheless, both SUNE and VSLR could come to a mutual agreement on a different outcome vs closing the transaction.”

The deal, which would catapult SunEdison into the fast-growing residential solar market and give its yieldcoTerraForm Power Inc. access to a new class of assets, drew swift condemnation from the market. The company’s stock closed Aug. 27 at $10.10 per share, down 68% from $31.66 per share on July 20, the day the deal was announced.

Investors have a number of questions: Did a buying spree at SunEdison go too far? Is the price for Vivint Solar too high? Are there problems with the way the deal is financed? And is a yieldco, which is expected to grow dividend payments reliably over time, the right kind of company to hold residential solar contracts?

The uncertainty has cost SunEdison. “I think that we’re seeing the impacts now over the last 30 days — we’re now at the end of that 30-day period for the stock value for [SunEdison], and we’ve seen a precipitous decline in their overall valuation. And it actually started around the same time as the Vivint transaction,” Conor McKenna, a managing director of CohnReznick Capital Markets Securities LLC’s New York and San Francisco offices, said in an interview Aug. 26.