Sunedison Inc (NYSE: SUNE)
Sunedison has had an incredibly hard time in the market as of late, and for good reason. The company’s financial structure simply isn’t working out. When we talk about SUNE, we’re talking about a company that has built its business around debt and, unfortunately, that debt has caught up to them. As a result, the stock has fallen dramatically. However, while the company is down at the moment, it’s not out quite yet, and chances are, it won’t be. Today, we’ll talk about why I believe that SUNE is likely to make it over this hurdle and investors will be happy they stuck around.
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Too Big To Fail!
You’ve heard the term too big to fail. This term became the topic of news headlines following the 2008 financial crisis. When I think about SUNE, the term too big to fail comes to mind. The reality is that the company manages billions of dollars worth of assets, creating an incredibly complex structure. Under the current structure of the company, it simply wouldn’t make sense for the company to file bankruptcy as there are other ways out of the pickle. As we’ve seen lately, Sunedison is selling its assets, generating cash that will allow it to continue running its company – at least in the short run. Nonetheless, I don’t think that this is where it’s going to end.
The reality is that selling assets will only do so much for SUNE at the moment as they work to make it over the hurdles that are set in front of them. So, where do we go from here? Well, in my opinion, Sunedison is gearing up for an acquisition. Here’s how I see it…
Activist Investors Are Likely To Scoop SUNE Up
There are plenty of activist investors out there, and these guys have incredibly deep pockets. Because of the massive declines we’ve seen on the value of SUNE as of late, the company is trading at an incredible discount, even when we account for the loads of debt that the company has taken on. As a result, activist investors with deep pockets now have the ability to band together and get an incredible discount on the company if they were to choose to acquire it. Based on this, I think it makes more sense that an activist investor, or group of activist investors, will likely pick up the company and bring it into the private space. In fact, a little snippet from a recent 13D filing shows that Greenlight Capital intends on doing whatever it takes to save SUNE, even if it means an acquisition. Here’s what the snippet offers:
“Greenlight intends to evaluate on an ongoing basis its investment in the company and its options with respect to such investment. In connection with such evaluation, Greenlight may seek additional calls and meetings with members of the Board and/or senior management of the Company, or communicate publicly or privately with other stockholders or third parties to indicate Greenlight’s view on issues relating to the strategic direction undertaken by the company and other matters of interest to stockholders generally, including management. As part of such evaluation and any such discussions, Greenlight may make recommendations, suggestions or proposals to the company that may related to or result in one or more of the transactions specified in clauses (a) through (j) of Item 4 of Schedule 13D, including but not limited to: changes in the strategic direction of the Company as a means of enhancing shareholder value, changes to the Board, changes to the Company’s senior management, changes to the Company’s charter or bylaws, acquisitions or disposition of securities of the Company, changes in the Company’s capital structure or dividend policy, and the sale of material assets or other extraordinary corporate transactions, including the sale of the company.”
There you have it, the biggest investor in SUNE sees the sale of the company as a possibility, and in my opinion, they are likely the ones that are going to buy it.
The bottom line here is that Sunedison is in trouble. The company is dealing with more debt than it can handle, and that’s taking a toll on investors, sending the value of the stock down. However, at the current price, if an activist investor or two decided to work together to purchase SUNE outright and take it private, they would be able to save the company and get it at a very good discount. In my opinion, this is what’s coming next.
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What Do You Think?
Where do you think SUNE is headed and why? Let us know your opinion in the comments below!
[Image Courtesy of Wikipedia]