Sunedison Inc (OTCMKTS: SUNE)
Sunedison has taken quite the beating over the past year, and for good reason. The company’s finances simply didn’t add up and, ultimately, debt caused the company to file for Chapter 11 bankruptcy. However, is there still a chance that the company can make it back into a positive light in the long run? In my opinion, the answer is yes! Today, we’ll talk about the primary issues that led to the mess the company is in now and why I believe that holding a position in SUNE will pay off in the long run. So, let’s get right to it…
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Why SUNE Fell So Far So Fast
As mentioned above, Sunedison has been facing an incredibly hard time in the market over the past year. The stock that was once trading at over $30 per share is now trading at under $0.30 per share. There are a couple of reasons for the massive decline we’ve seen in the company’s stock price, but they all revolve around debt:
- The SUNE Business Model – The Sunedison business model is quite interesting. The company builds solar power plants and turns around to sell the power generated to utility companies. However, this comes with large expenses that take a while to recoup. After all, it costs millions of dollars to build a solar power plant. So, SUNE had to take out massive amounts of debt in order to build the solar power plants to run their company.
- Acquisitions – Another thing that led to quite a bit of debt for SUNE was acquisitions. In order to solidify its position as a leader in the solar industry, the company has purchased several other solar companies in deals worth billions of dollars. Unfortunately, Sunedison took out even more debt in order to cover these acquisition costs.
- Bankruptcy – More recently, Sunedison announced that it would be filing Chapter 11 bankruptcy. All of the debt the company has amassed over the years added up, and this seems to be the only way out. As a result, the value of the stock fell dramatically once again.
Why I Believe Sunedison Can Make It Through This
Let’s face it, bankruptcy is never an easy thing for any entity, whether it be a consumer or a business. However, I don’t believe that this is going to be the end for SUNE. The reality is that the company has built a massive amount of assets, and while it may be required to sell a good portion of these assets, there will still be assets left over for the company to pick up where it left off. I’m also happy to see that the company was approved for Debtor in Possession financing, which will allow it to continue operations and end the year in a cash-positive space.
Here’s the deal… making it through bankruptcy is going to be an incredibly hard, uphill battle. However, I do believe that given some of the changes we’ve seen at the company, that we will see it pick up and eventually move forward in a positive light. With that said, I believe that the current price on the stock represents a strong opportunity. After all, it is possible that this $0.24 per share stock climbs quite a bit in the long run. All in all, SUNE is down, but the company is not out! With Einhorn maintaining his stake in the company, we can expect that if it can be done, it will be when it comes to actions needed to be taken to save the company.
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What Do You Think
Where do you think SUNE is headed moving forward and why? Let us know your opinion in the comments below!
[Image Courtesy of Wikipedia]