Sunedison Inc (NYSE: SUNE)
Sunedison has had an incredibly rough time in the market as of late, there’s no denying that. However, the stock is going to climb. The reality is that there’s quite a bit of good news that’s likely to push this one up. Today, we’ll talk about why SUNE has fallen on such tough times, how a billionaire activist investor is likely to change things, and other reasons that it’s worthwhile to be bullish on SUNE. So, let’s get right to it…
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The Number One Reason For SUNE Declines
As mentioned above, SUNE is a great company that has fallen on hard times. So, what is it that’s causing the value of the stock to fall? Well, it’s debt! Sunedison has a massive amount of debt, and recent restructuring of that debt has proven to be a major cause for concern for investors. Unfortunately, SUNE took on a deal that would allow them to pay off existing debt with new debt, and the interest rate on the new debt was far less than appealing. However, there is a flip side to this. The reality is that Sunedison’s debt comes nowhere close to the value of its assets… which brings us to that billionaire investor that looks to change things…
Can David Einhorn Save SUNE?
He absolutely can! Recently David Einhorn started vying for a seat on the SUNE board of directors. Finally, SUNE made the decision to give Greenlight Capital, David Einhorn’s hedge fund a seat on the board. This is likely to shake things up in a big way. You see, Sunedison’s biggest problem is debt. However, what investors don’t seem to be taking into account is the massive amount of assets the company has. In fact, if SUNE were to sell 100% of its assets, it would be able to pay off all of its debt with more than four and a half billion left over, which equates to more than $14 per share. The good thing is that while many investors might be overlooking this fact, Einhorn is well aware of it, and that feeds into his plans for the company.
You see Einhorn is pushing for two big changes. First and foremost, he would like to see a change in SUNE senior management. Which, I have to say, probably wouldn’t be bad for the company. After all, the current senior management did agree to an incredibly high rate on debt. The other change Einhorn wants to make falls right in line with what I mentioned above. He wants to see the sale of some of the company’s assets in an attempt to bring down the debt load. This is the big change. After all, it’s the massive amounts of debt that rub investors the wrong way. So, by chipping away at this debt, it wouldn’t be too hard to change investor sentiment. Especially considering all of the positive revolving around the renewable energy space.
Renewable Energy Is The New Black
Another reason I’m so bullish on SUNE is the change we’re seeing in overall opinions toward energy. The reality is that burning fossil fuels for energy is productive, but it’s also dangerous. Doing so releases greenhouse gas emissions, causing global warming. While this was just a theory in the past, the theory has been proven and governments are starting to act. In fact, here in the states, our government has made the decision to extend a 30% tax credit for consumers and businesses that make the decision to install renewable energy systems in their home or office. This will increase demand for SUNE products and others in the industry. However, the US isn’t the only country that’s making the change. In fact, a landmark climate change deal out of Paris shows that 195 countries are working to reduce greenhouse gas emissions. This signifies a tidal shift on how energy is created and what we can see from the industry in the future; an industry that SUNE is on the cutting edge of.
The Bottom Line
The bottom line here is that SUNE is a great company. While management has made a few mistakes, there’s no discounting the fact that the mistakes are reversible. With Einhorn helping to call the shots, I’m expecting to see big changes relatively quickly; causing investor sentiment to shift to the bullish side of the field. Also, with a shift in the views of energy, SUNE demand is likely to climb, leading to even more gains. All in all, I’m expecting to see great news in the long run from SUNE!
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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!
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