SunEdison Inc (SUNE) stock soared Thursday after the troubled solar energy company said its own investigation found no material misstatements or evidence of fraud. But this is hardly a get-out-of-jail-free card for SUNE.
Indeed, it’s closer to death than ever.
Although it’s nice that SunEdison gave itself a pass on the issues causing it to delay critical regulatory filings that are threatening to tip SUNE into technical default, the investigation doesn’t end here. There’s still the little matter of what the Department of Justice and Securities and Exchange Commission have to say.
Those are the only voices that really count. Perhaps the feds will concur with what SunEdison found, but until they do, the folks playing SUNE stock might want to ease up on the gloating.
Besides, even if SunEdison gets the all-clear from the DoJ and SEC, the company still is flirting uncomfortably close with bankruptcy protection, according to reports. As WSJ.com reported two weeks ago:
“The company is preparing a chapter 11 filing and is in talks with two creditor groups to obtain a loan to fund its operations during the process, according to people familiar with the matter. Creditors are likely to take control of the company and its portfolio of power projects, the people said.”
It gets worse. On Wednesday, Bloomberg data appeared to indicate that SUNE missed a bond payment this month. That means the company is likely in in technical default, according to bond research firm CreditSights.
Failure to cure by May 1 “could potentially trigger cross-default provisions in other debt obligations,” CreditSights said.
SUNE Stock: A Penny Stock Piñata
When we delved into SunEdison’s mounting problems about a month ago, we said it was a goner. It’s possible we overestimated the impact of accounting issues (let’s wait for the feds), but it was clear that SUNE was on its way to penny-stock territory.
Shares were struggling to top $2 at the time. Even after Thursday massive early rally, SUNE was still all the way down to around 70 cents.
And so this is what SunEdison has come to: a company that was going to revolutionize the way alternative energy projects are financed — and that not long ago had a market cap of $10 billion — is now a penny-stock piñata.
SUNE is great for small-time gamblers. Anyone who took a quick long position at any point in April is doing cartwheels today.
For investors, though, it’s a joke. There’s a reason why Wall Street research firms are dropping coverage left and right. That alone tells you this is not a serious investment and no sober equity investor would bother with it. SunEdison is still closer to bankruptcy than not and subject to two government investigations.
If you think Keno is a retirement strategy, go nuts, but if there were ever a time to cash out, today is it.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.