Sunedison Inc (N:SUNE)
SunEdison has had a rough time as of late. After climbing to $6.74 per share on December 21st, the stock has essentially been tanking, falling to the current price of just over $3.40 per share. As a result, many investors are starting to give up on the stock. However, I believe that those that give up on the stock at the moment are going to be very sorry the did. In fact, I believe that SUNE is likely to climb. Today, we'll talk about why SUNE investors are getting cold feet and why it's not time to give up on the stock. So, let's get right to it...
Why SUNE Investors Are Starting To Get Cold Feet
When it comes to SunEdison, there are a couple of reasons that we're starting to see price movement driven by fear. Those reasons include:
- Legal Trouble – In late December of 2015, it was announced that a law firm has launched a class action law suit against SUNE. The suit claims that SUNE misled investors with regard to financial strength and growth potential. Essentially, after producing several positive quarterly earnings reports, SunEdison made the decision to spend massive amounts of money on acquisitions, leading to poor market movement and financial statistics.
- Debt Restructuring – Another big story that's been dragging SunEdison downward is their plan to restructure debt. The company has come up with a plan to pay off outstanding debt amounting to more than $700 million by taking out new debt. The problem is that the new debt comes with an interest rate of Libor plus 10%.
Why Investors Really Shouldn't Be Concerned
While I can understand the concerns among investors, I have to say that there really isn't much to worry about. First, lets address the legal troubles. The class action suit claims that SUNE misled investors. However, I have to disagree with this assessment. When SunEdison released the overwhelmingly positive earnings reports, they were not lying about what they did. Also, the company has been incredibly transparent with regard to acquisitions and the cost of those acquisitions. Not to mention, there's an important statement in business - “You have to spend money to make money!” That statement rings true here. While there is no arguing that SUNE spent quite a bit of money on acquisitions, the simple fact is that the acquisitions were good for the company and its investors.
Now, let's get to the debt restructuring. As mentioned above, SunEdison recently restructured its debt at a rather high interest rate. However, this is another issue where I don't believe SUNE investors should be concerned. The reality here is that things are changing in the world of energy. With the recent Paris climate change deal and the extension of the renewable energy tax credit in the United States, sales in the renewable energy sector are likely to climb. Thanks to the acquisitions the company has taken part in, SUNE is well positioned to take a large market share in the solar sector, allowing the company to take advantage of the growth we're likely to see in the sector. Therefore, as sales climb, the debt will prove to be a null topic as SunEdison should have no issue paying the debt off while producing solid profits for investors! All in all, things are looking great for SunEdison and its investors!