By Parke Shall
Hoping for some "too good to be true" conspiracy theory? Sorry, we can't offer one. David Einhorn is selling his shares because the company is going to be filing for bankruptcy really soon. Probably within just hours or days.
Street Insider reported,
In a 13D filing David Einhorn's hedge fund Greenlight Capital disclosed a 2.8%, or 11,331,833 share, stake in the company. This is down 58.26% from the 27,151,576 shares held.
Social media is perpetuating a whole new host of backended conspiracy theories trying to explain some convoluted process by which Einhorn is actually trying to save the company. All of this is nonsense; Einhorn is selling simply because he's cutting his losses. Yes, investors even cut their losses here at $0.35. It tramples on the theory of "why sell now, I'm already down 95%?"
There aren't too many "ifs ands or buts" about the situation, despite what we continue to read on social media about SunEdison (SUNE). Every time we say this might be our last article on SUNE until after the restructuring, we feel it necessary to respond to a new slew of crazy conspiracy theories that seem to be giving false hope to investors that there is a chance for an equity recovery from this point for SUNE. Just like we said at $.80, you are likely to see your equity investment be reduced by between 80% and 100% over the coming weeks. The investors we warned just weeks ago have already experienced over 50% losses from buying "cheapies" under $1.
We have also been trying to keep an eye on the evidence that the company is definitely filing for bankruptcy. Sure, it hasn't happened yet. However, the evidence continues to stack up in favor of the company definitely filing for bankruptcy. Most recently was an article out by Bloomberg last night, where it states that the company's bankruptcy could be one of the more complicated bankruptcies in history due to the convoluted make up of the company.
The companies' finances will make a potential bankruptcy a challenge, said Greg Jones, an analyst with CreditSights Inc., a New York-based research company.
"It can potentially be more messy," he said. "It'll get really complex and complicated real fast."
SunEdison's financial structure is so opaque that its own employees have raised questions, and the company is being investigated by the U.S. Department of Justice and the U.S. Securities and Exchange Commission.
This, of course, follows reports over the weekend that a bankruptcy filing could have come as soon as this past Sunday night. The fact that it hasn't happened by Sunday leads us to believe that we are literally hours away from the company filing for bankruptcy.
The remaining equity value of SUNEQ is going to rely on how the company winds up treating it's equity through the process of restructuring. Equity is the lowest item on the capital and debt structure totem pole, so we've been predicting an equity wipeout.
We are starting to think that the announcement of the bankruptcy at this point may even lead to a small pop in the shares, as desperate traders are looking for any type of news that they can spin to be positive for the company. However, the reality of the situation is that the equity will probably once again fall more than 80% from levels here around $.34 and possibly wind up somewhere around five cents or lower.
Judging from Mr. Einhorn's filings, it seems like he wanted to wait until the last minute to try and cut his losses. It looks as though perhaps Mr. Einhorn was involved with management in trying to figure out a way to avoid bankruptcy, but his sale of shares recently at prices near the current trading price is indicative of him simply wanting out.
It is not a good sign, no matter how you try and spin it.
Those of you that are buying shares at this price are now the counterparties to one of the world's best hedge fund managers saying "I quit" with SUNE. Although Mr. Einhorn still holds a small stake after his equity sale that was filed yesterday, we expect to see that portion of his equity sold as well.
Call Einhorn's bluff at your own risk.
Disclosure: I am/we are short SUNE.
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.
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