After SunEdison, Who's Next?
In a not-so-surprising news break last week we learned that ticker SUNE better known as SunEdison has filed bankruptcy. Those of us in the know, in the industry, or just investors saw this coming for months. You can't wildly spend and keep increasing your debt only to think nothing bad will happen.Ted "The Wolf" Strzelecki
I have to say as a financial guy myself, how did the board and management let this happen? It was so undeniably obvious there was no way with the debt structure and shear amount that it would topple like a house of cards. So in keeping with this, others are beginning to ask which major solar player is next? One look at the financials of the largest players would tell you that all of them are ripe for the downfall. Especially the leasing companies. Boggles the mind when you understand how they generate revs and just how much they overcharge their customers how in the hell they could that much in the red?! Too big to quick? Sure something to do with it. Large stakeholders in the company having golden parachutes and "PAR" preferred protected shares? Of course. Why else did they go public?
See if a company is profitable and the founders are making a great living for the risks & sacrifices they took they don't need to go public. It's only when the company needs to raise massive funding OR the founders want to liquidate a huge block of shares does it ever go public. Again, if they are ran correctly and doing well there is no need to open yourself to massive amount of prying eyes, scrutiny, and headaches of having shareholders and the SEC. Knowing all this people keep throwing their money at these large solar lease companies not fully understanding exactly the business model or worse, where their money is actually going to. When they release a PR stating they closed another round of funding for hundreds of millions most people think that is great. What the intelligent financial people understand is now they have another obligation with interest to pay back. Its certainly not really a positive, especially when you are already in a massive, massive, hole to begin with. We are not saying that all debt is bad. However, a company should only take on debt it has contractual pipeline to fill and repay that debt service. Taking on debt to pay other debt or to "hope to" is like having a hole you need to fill in so you dig another hole next to it and fill in the first one with the second hole's dirt!
You can probably guess the names of the companies I am writing about. This only further should be alarming that you know who they are because of their financial troubles. One must ask, if you can't turn a profit in a time when the ITC guarantees you a 30% return on investment how they hell are they going to keep afloat after 2019?! Keep that in mind when you sign a 20 year commitment. You wouldn't lease from a landlord that is behind on his mortgage and may lose his property would you? Think about it before putting ink to paper. One last thing, the only industry that has companies buying each other out more than banking currently is solar. Be wary of a solar company that is changing it's name often. It usually is for detrimental reasons and avoidance.
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