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What We've Learned From The SunEdison Saga

Summary

As SunEdison prepares to file for bankruptcy, it is important for investors to learn from the SunEdison saga.

Both contributors and commenters have made SunEdison one of the most fiercely debated stocks on Seeking Alpha.

I asked contributors and commenters to reflect on what they've learned from SunEdison.

This piece highlights important lessons learned by both contributors and commenters on SunEdison.

Introduction

As SunEdison (NYSE:SUNE) prepares to declare bankruptcy, it is important for investors to reflect and learn from the SunEdison saga. Investing is about making informed choices with whatever information is available and one important source of information is fellow investors. Seeking Alpha as a platform is designed to get investors to communicate with each other and help everyone arrive at actionable ideas.

There are always important lessons to learn whenever an investment succeeds or fails. I asked contributors and commenters to reflect on what they've learned from SunEdison. This piece highlights important lessons learned from some of the most prolific contributors and commenters on SunEdison.

What Contributors Have Learned

A lot of contributors on Seeking Alpha have provided smart commentary on the company. Although the bears were ultimately correct in this case, each contributor learned various lessons from covering SunEdison.

Below are lessons that two of the most prolific contributors on SunEdison have learned from following the company.

"Financial engineering is a beast, if untamed, can destroy companies. The ongoing revelations indicate that the management either did not understand or underestimated the challenges of taming this beast.

We are reminded of a powerful quote from disgraced CEO Ramalinga Raju of Satyam Computers to explain the disintegration of his company. "It was like riding a tiger, not knowing how to get off without being eaten"

Unwittingly, Ahmad Chatila and team became victims of the financial engineering that they championed.

One thing I've learned is that if the balance sheet is too convoluted to understand fully, it's probably a good idea to stay away. I spent a long time analyzing it and thought I had it figured out multiple times, only for yet another thing to pop up I hadn't considered.

What Commenters Have Learned

The first article I wrote on SunEdison last September received only 36 comments. Most articles now receive well over 100+ comments with many valuable insights and comments. Below are lessons that commenters have learned from SunEdison.

I won't pull any punches - SUNE [along with Valeant and a handful of other companies] has led me to be deeply skeptical on the idea of efficient markets. Between (1) the bubble that analysts created with high price targets, (2) the perpetual rumour mill, and (3) the lack of communication from management, retail investors never had a chance with SUNE.

The system also seems broken, notably, SUNE's independent audit committee found no wrongdoing, only an "overly optimistic culture." That seems patently wrong to me, clearly something went seriously wrong with the company yet no one will be punished.

There are lots of things I've learned about SUNE in general. There are a few things that stand out.

(1.) Nothing is ever too big to fail. I already knew this but at times, I was inclined to think otherwise.

(2.) If you can't really follow the financials, especially after tens of hours of studying, you might want to stay away. For me, SUNE was always a roulette spin. I knew it would blow up, never sure which direction at any one time. I was long (always options) because it could go much further in that...


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