Shares of yieldco TerraForm Power Inc. (NASDAQ:TERP) jumped as much as 11.2% on Thursday, on reports that Brookfield Asset Management (NYSE:BAM) has made moves to potentially buy the company. At 3:30 p.m. EST, shares were still up 8.2% on the day.
Brookfield Asset Management has met with TerraForm Power's independent board members to discuss potentially taking control of the company. This could come in the form of buying SunEdison's controlling stake in the yieldco (the B shares) and potentially some common shares (the A shares) as well. Another proposal is to buy the company outright.
It may be a positive outcome for someone other than SunEdison to run TerraForm Power, but we don't know at what price, or whether those controlling SunEdison's bankruptcy would agree to the deal. So the news today is simply speculation, with little information to back it up.
Investors have been in this back-and-forth game with TerraForm Power, as different funds come in with offers to buy SunEdison's stake in TerraForm Power, only to be rebuffed. The challenge is that potential buyers want a low price that will boost their returns, and SunEdison and its debtors want to maximize what they get for the asset. That creates a standstill, with TerraForm Power stuck in the middle.
Shares may be trending higher today, but the gains can be given back if talks end or the price Brookfield is willing to pay comes in below expectations. No matter what, I'm not speculating on a buyout today, given how many times these talks have been a false alarm.