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What: Shares of yieldco TerraForm Power Inc. (TERP) jumped 29.1% in June, largely on the back of big investments from hedge funds.
So what: Brookfield Asset Management revealed on June 29 that it had acquired 11.1 million shares of TerraForm Power and had swaps to buy another 11.6 million shares. This adds to positions held by Appaloosa Management, Greenlight Capital, and BlueMountain Capital, which own over 1 million shares of the stock each.
The bullish bets have pulled shares of TerraForm Power higher this summer, but we still don't have up-to-date earnings filings. Bondholders say the company has technically defaulted on debt, and there's a leadership vacuum at the helm.
Now what: With hedge funds potentially having exposure to over half of TerraForm Power's Class A shares, they're betting big that sponsor SunEdison's bankruptcy won't drag the yieldco down with it. That could end up paying off in spades, but there's a lot of risk and very little data supporting the company today. With that said, having such big names behind the stock has to be reassuring for investors because these hedge funds have got a lot riding on TerraForm Power's success.
