Yikes! Shares of SunEdison plummeted nearly 34 percent on Tuesday to $3.02, its lowest price since December 2012. Investors, already concerned about the renewable energy company’s debt and liquidity, were apparently spooked by a report in Bloomberg that more than $700 million of the company’s debt was reclassified from “non-recourse” to “recourse,” which means creditors can take collateral in the case of a default. Investors are also not too happy that many hedge fund managers who previously were big fans of the stock apparently dumped large stakes in the third quarter. They include such luminaries as New York-based Third Point; Greenwich, Connecticut-based Lone Pine Capital; New York-based York Capital Management; and Chicago-based Balyasny Asset Management. Meanwhile, on Tuesday Deutsche Bank cut its price target on the stock from $28 to $16, citing “recent guidance and market changes.”
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A large majority of activist hedge funds expect to seek additional capital over the next 12 months. According to a survey of 24 activist firms conducted by TI Consulting and Activist Insight, 86 percent of the funds expect to engage in new capital raising over this period. Activists currently manage a total of $342 billion, according to the report. This includes $169 billion managed by what it calls primary focus activist funds and $173 billion by partially focused activist funds. The report also notes that as activist funds become larger, they are targeting bigger companies. As proof, it points out that since 2013, activists have sought board seats at 43 companies with market capitalizations exceeding $10 billion, nearly double the 23 sought between 2010 and 2012.
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Avenue Capital Group’s Marc Lasry said at an investment conference that investing in energy debt presents a “once-in-a-lifetime opportunity.” Speaking at the Reuters Global Investment Outlook Summit in New York, Lasry, who recently shut one of his hedge funds as he morphs further into a private equity model, noted that the amount of distressed energy debt has grown from $100 million at the beginning of the year to between $250 billion and $300 billion. “Either you will get paid off, or you will become the new equity of these companies,” Lasry reportedly told the audience. But he said you may need to wait between two and four years to realize your gains.
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Another hedge fund is shutting down. Chicago-based Achievement Asset Management, headed by former UBS executive Joe Scoby, is closing after losing about 7 percent this year on energy corporate bonds and other related investments, according to the Wall Street Journal. The fund, which was spun off last year from Chicago-based Peak6 Investments, plans to return to investors at least half of its $900 million or so under management before the end of November, according to the report.
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Soros Fund Management, George Soros’ family office, said in a regulatory filing that as of November 6 it owned 1.4 million shares of Hercules Offshore, or 7.02 percent of the provider of offshore contract drilling and liftboat services to the oil and gas industry. The New York-based firm did not disclose a position in the stock in its recently filed third-quarter stock-holding disclosure form.
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New York-based Eminence Capital said on November 5 that it raised its stake in HomeAway by 75 percent, to more than 7 million shares, or 7.3 percent of the vacation rental marketplace.
