Billionaire Einhorn Goes Activist on Sunedison Inc. (SUNE), Lands Board Seat, Plus 3 Other Investor Moves

According to London-based LCH Investments NV, Ray Dalio of Bridgewater Associates is the manager of the hedge fund that has generated the highest amount of money in the history of the hedge fund industry, overtaking billionaire George Soros last year. Dalio’s Bridgewater Pure Alpha fund made $45 billion last year, while the widely-known Quantum Endowment Fund earned $42.8 billion. It is important to note that the 20 most profitable hedge funds jointly earned $304.8 billion over the past ten years, which provides evidence that hedge fund managers do have the ability and skills to make money even amid extremely challenging environments. For that reason, the following article will discuss four filings submitted with the SEC by billionaire David Einhorn and three smaller-scale hedge fund managers.

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As revealed by a freshly-amended 13D filing, Willem Mesdag’s Red Mountain Capital currently owns 1.78 million shares of iRobot Corporation (NASDAQ:IRBT), which account for 6.1% of the company’s outstanding common stock. The size of the position is unchanged from the fund’s 13F for the third quarter. The 13D was filed in connection to Red Mountain’s recent talks with the robotics company’s management. Earlier this week, Red Mountain sent a letter to iRobot’s Chairman and Chief Executive Officer, offering a settlement proposal that stipulates the immediate appointment of Larry Peiros and Willem Mesdag to the company’s Board, an increase in the size of the company’s Board to nine members from eight, and the formation of a Capital Allocation Committee. This settlement proposal “would avoid an unnecessary election contest at the Company’s upcoming annual meeting” and could eventually assist the company in strengthening its market leader position in the home robotics industry. Furthermore, Red Mountain believes that iRobot Corporation (NASDAQ:IRBT)’s underperformance can be primarily explained by the company’s sustained commitment to its unprofitable Defense and Security and Remote Presence businesses and the company’s capital allocation decisions with regard to R&D expenses and cash accumulation. Most importantly, Willem Mesdag and his team have formulated a clear plan that they believe would enable the robotics company to maximize long-term shareholder value, which includes refocusing resources on the high-growth Home Robots business and the consumer end-market, discontinuing the Remote Presence business, and exploring strategic alternatives for the Defense and Security business. iRobot’s shares have gained 1% over the past year and trade at rather expensive price-to-earnings multiples. A mere ten hedge funds tracked by Insider Monkey were invested in the company at the end of the third quarter. Royce & Associates, founded by Chuck Royce, owns 166,000 shares of iRobot Corporation (NASDAQ:IRBT) as of the end of the third quarter.

Let’s head to the next pages of this article, where we discuss three other filings recently submitted with the SEC.

According to a newly-initiated 13D filing and its amended update, David Einhorn’s Greenlight Capital owns a 27.15 million-share stake in Sunedison Inc. (NYSE:SUNE), constituting 6.8% of the company’s shares. The freshly-disclosed stake includes 6.10 million shares issuable upon conversion of convertible notes and exercise of warrants. This compares to an 18.61 million-share stake revealed through the fund’s 13F for the September quarter. Billionaire Einhorn and his team engaged in discussions with representatives of the clean-energy company’s Board regarding the performance of Sunedison’s senior management team, the composition of the Board, and potential issuances of equity and equity-linked securities. Greenlight urged the company to appoint a new independent director designated by the investment firm and amend its bylaws so that the company would not be able to “make equity issuances without a supermajority vote of the Board, except in limited circumstances. It was revealed this morning that the two sides have already reached an agreement which will see Claire Gogel, a former partner at Greenlight Capital, added to Sunedison Inc. (NYSE:SUNE)’s board as an independent director.

The shares of the world’s largest renewable energy development company are down by a staggering 83% over the past year, after embarking on a steady downtrend since mid-July 2015, due to growing concerns over the company’s weak balance sheet. SunEdison was among the worst performing investments of Greenlight Capital in 2015, which contributed to the fund losing 20.20% for the year. 73 hedge funds from our system had positions in SunEdison at the end of the third quarter, compared to 93 registered at the end of the second quarter. Just recently, Christian Leone’s Luxor Capital Group acquired a 20.81 million-share position in Sunedison Inc. (NYSE:SUNE).

In a separate 13D filing, Joseph A. Jolson’s Harvest Capital Strategies LLC reported owning 3.25 million shares of Green Dot Corporation (NYSE:GDOT), which makes up 6.2% of the company’s outstanding shares. The investment firm owned 2.15 million shares of the prepaid debit card company on September 30, according to Harvest’s 13F for the September quarter. On January 25, Harvest Capital sent a letter to the company’s Board and revealed an in-depth presentation on the company, disclosing its discontent with “the continued mismanagement and value destruction at the Issuer under the direction of its current Chief Executive Officer, Steve Streit” and urging for an immediate leadership overhaul. The San Francisco-based hedge fund pinpointed the company’s failures under Streit’s leadership, but also proposed plans for unlocking shareholder value. Most importantly, Harvest Capital believes that Green Dot Corporation (NYSE:GDOT) can double its earnings per share over the next three-year period should the company implement the strategic “self-help” initiatives proposed by the hedge fund firm. Some of those initiatives include the removal of the current CEO, the reconstruction of the Board, and the adjustment of the cost-structure and optimization of the capital structure, among other things.

The shares of the largest provider of reloadable prepaid debit cards in the nation have lost 12% over the past year. Although the company’s total operating revenue for the first nine months of 2015 increased to $543.77 million from $450.94 million year-over-year, a spike in operating expenses overshadowed the top-line growth. The hedge fund sentiment towards the stock was negative in the third quarter, as the number of hedgies with stakes in the company dropped to 16 from 24 quarter-over-quarter. Ken Griffin’s Citadel Advisors LLC owns 1.74 million shares of Green Dot Corporation (NYSE:GDOT) as of September 30.

As disclosed by a Schedule 13G filing, Alexander Medina Seaver’s Stadium Capital Management LLC currently owns 6.97 million shares of Builders FirstSource Inc. (NASDAQ:BLDR), which represent 6.4% of the company’s shares. This denotes an increase of 3.37 million shares from the position revealed through the fund’s quarterly 13F for the third quarter. The supplier of building materials, manufactured components and construction services has seen its shares gain 34% over the last year despite losing 39% over the past six-month period. Builders FirstSource Inc. (NASDAQ:BLDR)’s business and financial performance are highly dependent on both the residential construction market and the residential repair and remodel market. Although the recovery of the housing industry got under way in 2011, single-family housing starts still remain below the historical average of 1.0 million per year. Hence, the toughening competition within the homebuilding industry and the low level of housing starts are anticipated to keep weighing on the company’s margins. Nonetheless, the stock trades at a forward P/E multiple of 8.37, which is well below the average of 15.48 for the S&P 500 benchmark. The number of hedge funds with positions in the company climbed to 39 from 25 during the third quarter, so the smart money does see bright prospects for the company. Ed Bosek’s Beaconlight Capital acquired a 1.0 million-share stake in Builders FirstSource Inc. (NASDAQ:BLDR) during the third quarter.

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