Sunedison Inc (SUNE) is soaring on news this morning that its audit commit did not find any “substantial evidence of fraud”. The stock is tearing it up 82 percent (make that 97 percent now) in early trading on the latest SEC filing. The move does seem a little irrational – we say we did not find fraud sorta so stock almost doubles? On the other hand, SUNE has tanked over the past twelve months, is now a penny stock, and there is big short interest, so any remotely positive news like this sometimes does move the market – that is how it works!
Specifically the Sunedison Inc (SUNE) 8K states:
The Independent Directors have determined that as of the date of the independent counsel report, there were no identified material misstatements in the Company’s historical financial statements as well as no substantial evidence to support a finding of fraud or willful misconduct of management, other than with respect to the conduct of one former non-executive employee as described below. However, the independent counsel materials identified issues with the Company’s overly optimistic culture and its tone at the top. The Independent Directors also identified several specific issues regarding the Company’s cash forecasting and liquidity management practices, including that:
the Company’s cash forecasting efforts lack sufficient controls and processes;Gates Capital Returns 32.7% Tries To Do “Fewer Things Better”
Gates Capital Management's Excess Cash Flow (ECF) Value Funds have returned 14.5% net over the past 25 years, and in 2021, the fund manager continued to outperform. Due to an "absence of large mistakes" during the year, coupled with an "attractive environment for corporate events," the group's flagship ECF Value Fund, L.P returned 32.7% last Read More
certain assumptions underlying the cash forecasts provided to the Board by the Company’s management were overly optimistic and a more fulsome discussion of risks and adjustments with the Board was warranted;
the Company’s management has not responded appropriately when forecasted targets were not met; and
the Company lacked sufficient controls and processes regarding the Company’s managing of cash flows, including extensions of accounts payable and the use of cash committed for projects, and related disclosures to the Board were not comprehensive or made on a timely basis.
All is good now right? Well, not necessarily despite the move to $0.68 this morning the future is unclear. CRT Capital has a new report out opining:
Sunedison Inc (“SUNE” the “Company”) is likely to, in our view, pursue a financial restructuring. We recognize that ihe Company’s capital structure is extremely complex, disclosure is limited, and recoveries could be meaningfully impacted by litigation.
SUNE is likely to, in our view, pursue a financial restructuring. GLBL and TERP issued 8-Ks on 3/29/16 and 4/1/16, respectively, in which they state that “due to SunEdison’s liquidity difficulties, there is a substantial risk that SunEdison will soon seek bankruptcy protection.”