As SunEdison's (SUNE) bankruptcy concerns have escalated over the past couple weeks, investors have also grown increasingly concerned that its YieldCo's, TerraForm Power (NASDAQ:TERP) and TerraForm Global (NASDAQ:GLBL) were going to be pillaged by the company in a desperate bid to stay alive.
Wednesday evening, the YieldCo's made a move clearly intended to diminish such concerns; they announced the immediate resignation of current President and CEO Brian Wuebbels. The timing of the move was interesting, as Appaloosa Management had called for TERP to overhaul its conflicts committee earlier today.
The YieldCo's boards of directors also created a new "office of the chairman" made up of independent directors which will lead them on an interim basis. The plan is for this new office of the chairman to lead the company's in the same way as would be done by a CEO, presumably while they search for a new one.
I believe that the announcement is good news for TERP and GLBL shareholders. It increases separation between the YieldCo's and SunEdison, which should undoubtedly increase investor confidence that the two will not be sucked into bankruptcy along with their parent. Chairman Peter Blackmore confirmed as much in the press releases, noting that "the Company's directors are mindful of their fiduciary duties and are committed to acting in the best interests of the Company and all of its shareholders."
In my recent article on GLBL, I argued that the company is worth substantially more than the $2/share it was trading for over the past couple days, even if the company wasn't able to add another MW to its current operating portfolio of 814MW. The stock was up to as much as $2.50/share after hours.
TERP is almost certainly similarly undervalued, given that it is currently yielding 16%, yet is in a similar situation as Abengoa Yield (NASDAQ:ABY). Abengoa has also seen their parent company file for bankruptcy, yet currently trades at a 10% yield, and never yielded more than 13%.
On the other hand, this is just one more piece of information indicating that SunEdison is very likely to file for bankruptcy protection very soon. I had been hopeful that the company could avoid bankruptcy for many weeks, but GLBL's 8-K filing on the 29th confirmed rumors that had cropped up from Debtwire the week before. As such, I've sold down much of my SUNE stake. Given the outcome, I'm glad that I was always more focused on owning the YieldCo's, as they should end up generating solid returns over the long term (and even short term for people that were late arrivals to this party).
Disclosure: I am/we are long GLBL, SUNE, TERP.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.