- Rupak De Chowdhuri/Reuters
SunEdison, the world’s largest renewable-energy company, has filed for bankruptcy.
This after seeing its stock slide over 90% since this summer.
SunEdison’s story is one of a company that used acquisition after acquisition to grow at a breakneck pace. In the process, it accumulated over $11 billion in debt and became a Wall Street darling stock.
That turned into a nightmare in July, when the company tried to acquire Vivint, a residential-solar firm, for a 52% premium.
Investors were outraged. They didn’t want Vivint’s lower-grade assets, and they thought the premium paid showed that SunEdison was in a more precarious financial situation than they had previously thought.
That’s when the stock started to fall, and it did not stop. Not when billionaire hedge fund manager and investor Leon Cooperman of Omega Partners asked if they company would buy back stock in August. (They said they would not.)
Not when investor David Einhorn, of Greenlight Capital, joined the board at the beginning of this year.
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To make matter worse, the company has an angry activist investor on its heels – the normally silent David Tepper of Appaloosa Management.
To understand why, you’ve got to understand SunEdison’s complex financial structure. SunEdison has two subsidiaries called yieldcos, TerraForm Global and TerraForm Power. They were meant to act as utilities, managing SunEdison projects and collecting cash.
According to Tepper, a TerraForm Power shareholder who filed a lawsuit against the company, SunEdison was also forcing the yieldcos to give up that cash to the parent in unfair deals called “take-or-pay” agreements. Essentially, the yieldcos would have to buy projects from the parent or pay a fee.
“We don’t start things just to start things,” he told Business Insider back in February.
Eventually, in all this chaos, the Vivint deal was called off, as were a number of smaller SunEdison deals. The company also delayed filing its annual report, which only made investors angrier and more skeptical.
The SEC is also looking into whether the company lied to shareholders about its cash position last fall. After an internal audit, the company admitted that it made some accounting mistakes, but not that it did anything criminal. It also said that an employee responsible for this had already been fired.
Of course, now the company’s main focus will be on the jockeying between all of its creditors – there are quite a few of them.