Posted on 12/02/2015 12:47:38 PM PST by SeekAndFind
On August 6, billionaire hedge fund manager Leon Cooperman took the unusual step of dialing into an earnings call for one of his fund's holdings and asking a question.
It was a second-quarter earnings call for SunEdison, a solar-energy company that went public in 1995. At the time, Omega was the 11th-biggest shareholder of SunEdison, with 8.8 million shares.
It's a large stake, but it is still unusual for Cooperman to pick up the phone to publicly ask a question on a company's quarterly conference call.
These were no ordinary circumstances, however. After enjoying the benefits of a classic Wall Street hedge fund pile-in -- when the smartest money in the stock market wants nothing more than to buy, buy, buy -- SunEdison was crashing.
Cooperman wanted to know if its executives would throw him and other investors a bone and buy back some stock. They responded, in no uncertain terms, that they would not.
Since that call, SunEdison's stock has fallen a further 80%. Its two subsidiaries, TerraForm Global and TerraForm Power, have seen their stocks fall 64% and 73%, respectively. There have been management shake-ups at both the subsidiaries.
The stock price collapses have burned some of the biggest investors in the business, including Cooperman, David Einhorn of Greenlight Capital, and David Tepper of Appaloosa Management.
And it is all because of doubts over a type of financial engineering that fueled explosive growth in the solar sector for two years, and now has investors questioning the entire sector.
(Excerpt) Read more at businessinsider.com ...
The shift in fortunes has been brutal. At an event in October last year, David Einhorn of Greenlight Capital called SunEdison "a wellâ€run, financially savvy company, benefiting from an open-ended growth opportunity trading at a bargain price."
He priced the stock at $32 a share. It's now trading at about $3.
The "open-ended growth opportunity" Einhorn was referring to is made possible by something called a "yieldco." It's the magical instrument that fueled SunEdison's growth and caught Wall Street's eye in the first place.
A yieldco is a company that generates cash from a group of assets, in this case solar projects, and then pays it back to investors as dividends.
The appeal for investors is in the name: yield. Having a public company with supposedly secure cash flows delivering 4% or 5% returns in the shape of dividends is attractive in a low-interest-rate environment.
But any risk to the security of those future cashflows can spook the same investors, and that’s what happened with SunEdison.
Another pyramid scheme. Those in at the beginning melee money because they’re skimming it off the top. Those that got on late - lose.
Look for connections to Obama and his gang.
Everyone who pays any attention at all knows that most large solar energy projects are scams, and that they will go belly up as soon as the government subsidies run out.
The big boys will already be out when that happens. The small guys can ride the roller coaster if they like, and if lucky make some quick profits, but they’d better not get stuck on it when the final drop arrives.
What was the fuel for the explosive growth in the solar sector?
I live in a heavily wooded area. I never really considered solar seriously, but I allowed one pitchman to talk to 3 minutes. After calling a more honest person in the industry, they told me that a simple Google Earth check would tell anyone that solar was not plausible on my home, even though I have a large roof area.
The hucksters from solar harassed me via e-mail, phone, and to my front door. They were relentless for their pound of flesh, and would not even listen to basic reality.
As I dismissed them one by one, they reacted as angry victims.
its all based on some form of debt or liability. The name and terms change, but in the end, that's the base of every type of "financial engineering."
We’ve had them come by, once by the solar company Tesla’s owner supports.
That it is inefficient, irregular, offset by subsidies that may end, were all argued against but mostly with “but ... but ... the planet!”
Someone once tried that on me - and I asked them if they loved The Lord. They literally ran away.
One of those deals where the company can point to some salesmen who make six figures a year (who happen to have territories like Phoenix or Tucson), but the guy who showed up at your door bought into a heavily forested territory like yours.
Free taxpayer money.
"For every dollar you make, there are 10,000 people trying to take every cent."
Government subsidies.
So the hedge funds are getting bitten by the kind of fast-and-loose financing that have been screwing average investors for years?
Solar City?
If solar was so an efficient form of power why isn’t the middle east covered with solar panels?
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