Sunedison Inc (OTCMKTS:SUNEQ) Squares Up Positioning


Sunedison Inc (OTCMKTS:SUNEQ) has been experiencing something of a short covering revival in equity trading excitement for the past two weeks. As a result, the stock is on every OTC trader’s radar on a daily basis. The main factor, regardless of rumors and speculation, is clearly about the 48% of the float that was held short into October.

There was no new information out about the company prior to this latest advance. The most likely outcome is still that we will see a full and complete cancellation of all equity value and no common shareholder participation in the restructuring agreement. Even still, with so many shares held short, this pop shouldn’t be a surprise given that the marginal increase of even 1% risk that the company’s TERP investment becomes valued in the agreement can have an enormous effect on how risk is appreciated in positioning.

Sunedison Inc (OTCMKTS:SUNEQ) frames itself as a company that develops, finances, installs, owns, and operates renewable power plants to residential, commercial, government, and utility customers.

It operates through Renewable Energy Development, TerraForm Power, and TerraForm Global segments.

The Renewable Energy Development segment provides renewable energy services that integrate the design, installation, financing, monitoring, operations, and maintenance portions of the renewable energy industry segment.

The TerraForm Power segment owns and operates clean power generation assets that sell electricity through long-term PPAs to utility, commercial, and residential customers based in the Organization for Economic Co-operation and Development (OECD) member countries, such as the United States, the United Kingdom, Canada, and Chile.

The TerraForm Global segment owns and operates clean power generation assets that sell electricity through long-term PPAs to utility and commercial customers based in specified emerging market countries located in Asia, Africa, Latin America, and the Middle East.

The company was formerly known as MEMC Electronic Materials, Inc. and changed its name to SunEdison, Inc. in May 2013. SunEdison, Inc. was founded in 1984 and is headquartered in Maryland Heights, Missouri.

On April 21, 2016, SunEdison, Inc. along with its affiliates, filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York.

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Gauge your risk accordingly if you are an interested prospective participant in this story. Otherwise, there are some interesting dynamics, but a little context should also be appreciated. As noted above, the Company is in chapter 11. As part of that case, the Company commenced a marketing process for its assets led by Rothschild Inc.

As of June 24, 2016, the Company received approximately 100 non-binding bids and indications of interest for its various business lines and all of its assets. As of June 24, 2016, an illustrative “sum of the parts” analysis based on these non-binding bids and indications of interest was provided to certain debt holders demonstrating a range of approximately $1.25 bln to $1.7 bln for total gross proceeds for such asset sales and subject to various contingencies, including diligence conditions and contingent earn-out consideration.

At this point, while short interest remains likely pretty high, and we do see some potential for at least a spirited contest in bankruptcy court where the TERP position is concerned, traders and investors should also take note of the Company’s most recent 8K filing:

“On October 5, SunEdison, Inc. (the “Company”) received a notice that the United States Securities and Exchange Commission (the “SEC”) is conducting a non-public, fact-finding investigation relating to the Company. The notice was accompanied by a subpoena, seeking production of certain emails and other electronic communications sent or received by certain current and/or former directors and/or officers of the Company, TerraForm Power, Inc. and/or TerraForm Global, Inc. As previously disclosed in the Form 8-K dated March 31, 2016, the Company previously had received a non-public, informal inquiry from the SEC. In addition, the Company has received subpoenas from the United States Department of Justice (the “DOJ”) seeking information and documentation relating to various matters. The Company and the board of directors intend to continue to cooperate fully with the SEC and the DOJ.”

As we have previously noted, this may turn out to be nothing.

Earning a current market cap value of $34.2M, shares of SUNEQ stock are caught in a roller coaster of viable yet conflicting ideas. The balance sheet is fatally wounded, but non-marginal odds of some serious risk for shorts in this equation. Traders will note a bit more than 120% added to share values of the name over the past month of action, a rally that has pushed up against longer standing distributive pressure in the stock.

However, SUNEQ is a stock who’s past is littered with sudden rips. Moreover, the listing has witnessed a pop in interest, as transaction volume levels have recently pushed greater than 130% beyond what we have been seeing over the larger time frame. For continuing coverage on $SUNEQ and other hot penny stocks, sign up for our free newsletter now and get our next hot stock pick!


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