Sunedison (N:SUNE) has had a rough time in the market as of late, partly because of a lawsuit that was filed against the company by David Tepper's Appaloosa Management. However, SUNE recently climbed on news that the company would be making a large acquisition. Nonetheless, Tepper and his team at Appaloosa have popped their heads up again, creating more problems for SUNE. Today, we'll talk about the trouble Tepper is starting, why I'm still a bull on Sunedison and what we can expect to see from the stock moving forward. So, let's get right to it.
David Tepper Is Very Against The Vivint Acquisition
Last week, we received word that SUNE shareholders have approved an acquisition of Vivint Solar (N:VSLR) in a landslide vote. Under the terms of the proposed acquisition, TerraForm Power (O:TERP), a SUNE yield co, is scheduled to buy 470 megawatts of Vivint's assets with a price tage of $799 million. However, David Tepper and his Appaloosa Management don't like this idea, and that's a big deal since Appaloosa Management owns 9.5% of TerraForm Power. As a result, Appaloosa Management is seeking an expedited trial in a challenge against SUNE and it's proposed acquisition of Vivint Solar. In a statement, Appaloosa Management had the following to offer...
“Appaloosa believes that an expedited trial is in the best interest of TerraForm and its stockholders.”
Why I'm Still Bullish On SUNE
Appaloosa Management has caused quite a bit of issues for SUNE as of late. However, I believe that the company is going to grow in a big way in the long run. Here's why...
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Addressing The Lawsuit – Appaloosa Management is doing everything it can to block Sunedison's acquisition of Vivint Solar. However, after the landslide vote held last week, SUNE has a responsibility to its investors to ensure that the acquisition does indeed go through. So, I believe that the Vivint acquisition is going to go through, even with Tepper doing everything he can to stop it.
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Current Changes In Energy – The energy sector has been a very interesting one to watch over the past year or so. Recently, we've seen several changes in the sector that show that consumers, businesses and governments alike are all working toward a reduction of reliance on the burning of fossil fuels. This move away from fossil fuels will lead to incredibly high demand for solar and other forms of clean energy. Because SUNE is one of the largest companies in the solar energy sector, they are likely to take a lion's share of this increasing demand.
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Power Purchase Agreements – One of the drivers of revenue for SUNE is known as the power purchase agreement. In fact, the company has several of these around the world. What Sunedison does with these is builds solar power plants. From there, they sign contracts to sell the power they generate to utility companies through the course of 20 years at a fixed price. These agreements guarantee strong revenue, and will likely be a key to Sunedison's long-term success.
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Debt Is Manageable – Finally, one of the biggest reasons that some investors are bearish on SUNE is debt. Now, I will admit, the company has a massive amount of debt. However, I have to say that I'm not concerned about the debt at all. The reality is that the debt the company has taken out is needed for growth. If they didn't want the debt, they could simply sell a few assets and pay it off, still remaining in a solid position. However, SUNE is focused on growth, and as an investor, that makes me incredibly happy.
The Bottom Line
The bottom line here is that Sunedison is a great company. Why Appaloosa Management has caused some problems for the company, this will be a short term hiccup on the chart. In the long run, things are looking great. SUNE seems to be on the right track to take the lion's share of growth in the solar industry and this should lead to strong revenue and strong profits in the long run.