Is the Market Turning Around on a Stock that Hedge Funds Love?

Recently famous short seller John Hempton threw his hat in the bullish ring, disclosing that he too was long (see details). In his blog article ‘Sun Edison – some comments and a way forward’, Hempton acknowledges that there are a lot of self fulfilling prophecies in the market. If enough investors believe something is going to happen, it could happen. That’s why there is FDIC insurance, because if enough people believe a regional bank has a liquidity crisis, it will have a liquidity crisis. Given the steep decline in Sunedison shares, many investors are worried about Sunedison’s liquidity. The acquisition of Vivint will cost Sunedison and its captive yieldco around a billion dollars in cash. That’s concerning for investors because Sunedison operating activities are cash flow negative. From Hempton’s research, however, he doesn’t think Sunedison will go bankrupt because of lack of liquidity, although he can’t be 100% sure because he can’t see all of Sunedison’s data. But from everything that he can see, Hempton thinks Sunedison is a reasonably good security to go long.

Sunedison’s liquidity profile is improving. It recently raised $1 billion from a warehouse facility and could raise more in the future. What would really help would be for Sunedison to call off the Vivint acquistion that is expected to close in the fourth quarter.

Disclosure:none