Sunedison Inc (OTCMKTS: SUNE)
Sunedison has had an incredibly hard time in the market as of late, there’s no denying that fact. Unfortunately, the company was dealing with massive amounts of debt, and in the end, that led to bankruptcy. But what’s the whole story? Today, we’ll talk about why SUNE had such a rough time, what’s going on now, and what we can expect to see from the stock moving forward. So, let’s get right to it…
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What Went So Wrong With SUNE?
The problems at Sunedison, as mentioned above, are the result of a massive amount of debt. In the end, there are two factors that pushed the company to taking out so much debt. Here they are:
- The SUNE Business Model – Sunedison makes its money by building solar power plants, then turning around and selling the power generated at wholesale rates to utility companies through long-term contracts. However, in order to build the power plants in the first place, SUNE needs money. As a result, the company would take out large amounts of debt to fund the process of building these power plants. While this alone would have never sent the company’s finances down the drain like we’ve seen, this in combination with other factors caused quite a bit of pain for the company.
- Acquisitions – The other big factor that led Sunedison into a mountain of debt was acquisitions. You see, the company knew that by purchasing the larger solar power suppliers around the world, it could solidify its position as a leader in the industry. So, SUNE took part in massive acquisitions. Of course, they didn’t have the money laying around to fund these acquisitions. As a result, the company had to take on billions more in debt.
Between these two factors, SUNE ended up building up more than $11 billion in debt. Unfortunately, the debt got so high that Sunedison simply couldn’t keep up with payments. As a result, the company recently announced that it would be filing for bankruptcy which proved to be a major hit! Throughout this entire issue, the company’s stock fell in value from more than $30 per share to under $0.30 per share and, unfortunately, the stock continues to fall.
What’s Next For SUNE?
Unfortunately, when a company goes bankrupt, it’s more common for the company to end up not paying shareholders and going out of business. However, in this particular case, I don’t see that happening. First and foremost, Einhorn maintains a relatively large stake in Sunedison. If smart money saw that they were going to lose, they wouldn’t stick around to watch the show.
However, it’s also important to remember that SUNE has a massive amount of assets. Sure, they are likely to lose a good chunk of these assets to the bankruptcy. However, in this particular case, I don’t see the company going out of business. In the long run, I’m expecting to see growth. Now, it is going to be an uphill battle, and the management at SUNE will have to be on their toes. However, if everything is done properly, Sunedison can survive. Being that I like to stay on the bright side, that’s what I’m expecting to happen.
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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]