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Einhorn's Intervention At SunEdison Might Be A 'Buy' Signal

Summary

David Einhorn gaining board seats could spark a catalyst.

On a SOTP parts basis, shares appear to be worth over $15 per share.

Managerial changes and asset sales should act as additional catalysts for unlocking shareholder value.

David Einhorn's Greenlight Capital (NASDAQ:GLRE) will add a former partner from the hedge fund to the board of SunEdison (NYSE:SUNE). Effective immediately, Claire Gogel will join the board of SunEdison. According to filings, Greenlight Capital will look to sell various assets or the company outright. SunEdison also agreed to a deal with Greenlight not to issue equity for two years without the approval of almost all members of the board.

The market is fed up with SunEdison and slammed the company over 90% in only the last six months. Is this decline justified? Is there no value to this company? Will Einhorn be able to unlock shareholder value?

SUNE Chart

SUNE data by YCharts

Einhorn's presence and recent board activity tell us that he sees the exceptional value or he would've left months ago. Let's see if there is a potential opportunity in SunEdison at current levels.

How did this all start?

SunEdison was one of Greenlight's most promising investment opportunities. In an October 20, 2014, presentation at the Robin Hood Conference, he had this to say about the company:

"We believe the market misunderstands SunEdison. The financial statements are complicated because they consolidate the company's interests in several public companies and the non-recourse debt of various solar projects that SUNE controls. This makes it challenging to decipher the economic value of the company from a cursory review of the balance sheet or income statement. We believe this leads to sell-side analysts mis-analyzing the company, and the market undervaluing the stock..."

SunEdison helped pioneer a business model that was incredibly popular with renewable energy companies. The company would build a solar power plant and simply sell the power plants to a yieldco subsidiary...


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