Thursday, November 19, 2015

SunEdison's new shareholders

There are 316 million SunEdison shares outstanding and - at pixel time - which is still before close - 128 million have traded.

There will be plenty of day-traders.

But even then there is likely to be one or two very large new shareholders. I have no idea who they are.

Whatever: I can't imagine them leaving Ahmad Chatila (the CEO) in place.

He has refused to resign, doesn't speak to reputable credit analysts and is responsible for the VSLR purchase.

The only remaining question: how bloody is the fight over his removal?

Mr Chatila should resign quickly and leave it to the new shareholders (if they wish to identify themselves) to pick his successor.

Ultimately he won't have any choice - but going without a fight will minimise the damage.


Whether the new shareholders are new bag holders is yet to be seen. I don't think they will be but the market disagrees with me.


Unknown said...

The CEO/executives inaction and inability to communicate not just with analysts, but with the market at a whole, while their common is slashed 50% in mere days is just gross negligence.

Ferdinand said...

Hi John,

I entered as a long today. I know the distributed generation market fairly well. I entered to bet on a successful acquisition of Vivant. I believe that the distributed generation market will deliver a far better gross margin than the utility market going forward, as SUNE's gross margin in the utility market is unsustainable. I believe that this is the reason for the acquisition of Vivant as well as the drop in share price. There's a high percentage likelihood that other longs are seeing the same thing. They will support the completion of the acquisition.

SUNE on a run down basis is fairly valued with the Vivant acquistion providing more upside to the current share price due to a more sustainable gross margin.

dreamer said...

I think there is a fundamental flaw in SUNE business model. Renewable energy project development business has no moat at all (just look at how many companies are there in Germany, UK, US and in emerging markets) and hence no company can generate very high level of gross margins sustainably. Developers made very high levels of margins in the early stage of market development in almost each country, but as market developed margins came down massively. In Germany and UK developer margins are as low as 0.1-0.2 USD/W. SUNE with its high level of overhead can not generate profits in this.

With respect to distributed generation market, it is same story. Residential solar companies have made lots of money in last years, but it will change significantly after 2016 as ITC is cut from 30% to 10% and net-metering rules are changed in more and more states. It might be a more profitable business than utility one but I think SUNE is late in this and has overpaid for VSLR.

Umbriferum said...

Hi John,

What do you think are the odds that Ahmad has went into denial and refused to put a full effort into lawyering up and weaseling out of the Vivint deal? It would be a direct admittance that he has made a fatal mistake and as Charlie Munger said, it's often difficult for people to admit to doing so even in the face of overwhelming evidence.

I mean, the market obviously sees this deal as a tremendous liability so even if sunedison were to pay a huge fine, it could still be very much worth it. Can you give us any insight into the law in this area?

You've called Ahmad a visionary genius, but I have to beg to differ on this one as many may look very smart when the tide is rising when they are merely being reckless and aggressive.

I certainly hope that an activist has entered the fray, but I fear if the situation has become too uncertain for anybody to try to fight this one out.

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.