Any investor’s worst nightmare is a bad call on a stock. Bill Ackman can attest to this fact and so can David Einhorn whose SunEdison (NYSE:SUNE) is becoming a burden on the activist investor’s portfolio. The company was one of the biggest reasons why Einhorn’s hedge fund Greenlight Capital lost about 20.4% of its value.
Things went from bad to worse in a blink of an eye for SunEdison (NYSE:SUNE) and the rumors of SunEdison filing for bankruptcy had been circulating in the market for quite some time. But now it seems they were more than just rumors.
According to rumors, the company may indeed be set to file for bankruptcy. In a filing SunEdison (NYSE:SUNE) said that it has gotten in touch with first & second lein lenders who will finance the reorganization. According to the company, it needs about $310 million in operational funds to stay in business. Moreover the company also said that it could still have $260 million cash shortfall by middle of June. When the company’s spokesman was approached he did not issue any statements or made any comments.
The prospect of a bankruptcy claim is certainly not sitting well with the Wall Streeters. The stock went down by 2% on Monday; this passive behavior on part of investors is understandable. We all know that after a restructuring process a company mostly comes back with a revamped infrastructure and business model. No one at this point knows whether these changes are going to work for SunEdison (NYSE:SUNE) or not and therefore investing money in such a situation could become risky.
SunEdison (NYSE:SUNE) dug itself quite a deep hole when the company went after the acquisition of Vivint Solar Inc (NYSE:VNSR), which piled up debt of about $11.7 billion. The market was quick to react to this huge figure along with SunEdison’s questionable business strategy and the company’s stock has gone down by 99% since July. Last month alone the stock dipped by 73%.
Terra Form Power and TerraForm Global, yeildcos of SunEdison (NYSE:SUNE) have already enlisted the help of legal and financial advisors to guide the units through the bankruptcy process should the parent company file for it.
One of the big blows is being served to one of SunEdison’s biggest shareholders David Einhorn and his Greenlight capital. The hedge fund currently has a 6.3% stake in the company. Another major casualty is Vanguard Group.
The company has no doubt become a questionable investment option. It will not be wrong to say that SunEdison (NYSE:SUNE) is having one of its worst years. Last month the company was under investigation from the Securities and Exchange Commission for a possible cash overstatement. Things became worst when SunEdison’s Chief Financial Officer was forced to leave.
Einhorn, who has become for SunEdison what Ackman is to Valeant, said that even though its low earnings and huge pile of debt are a source of concern for the investors, the company has what it takes to turn things around. But with the imminent bankruptcy claim, it may be hard to follow Einhorn at this point.
SunEdison currently has a market cap of SunEdison (NYSE:SUNE) is $72.83 million. The stock 52-week range is between $0.19 and $33.45.