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Why Piedmont Lithium, Sunrun, and CBAK Energy Technology Stocks All Just Dropped 10%

By Rich Smith – Oct 8, 2020 at 3:17PM

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What went up is coming back down.

What happened

Alternative energy stocks are making headlines again Thursday -- this time, not in a good way. Tic-tac-toe, three in a row, we're watching shares of start-up lithium miner Piedmont Lithium (PLL) fall 13.1% in 1:55 p.m. EDT trading, while Chinese lithium-battery maker CBAK Energy Technology (CBAT -0.81%) slips 11.2%, and rooftop solar company Sunrun (RUN -3.36%) gives up 10.5%.

In only one of these cases does there appear to be a clear reason for the decline.

Three colorful arrows all pointing down

Image source: Getty Images.

So what

In what looks like a case of "buy the rumor, sell the news" -- or rather, "buy the merger, sell the merged" -- investors are dumping shares of Sunrun stock as it consummates its acquisition of Vivint Solar.

In a Form 8-K filing this morning, Sunrun confirmed that it "has completed its acquisition of Vivint Solar which was initially announced on July 6, 2020." In so doing, Sunrun says it "solidifies its position as the leader in home solar and energy services across the United States and a top owner of solar assets globally with more than three gigawatts of solar energy and more than 500,000 customers." That sounds like good news, but investors don't seem to be treating it as such.  

Why not? In the absence of any other "bad news," one can only guess. But with the merger now complete, investors may be shifting their attention to wonder how much acquiring Vivint (which lost $102 million last year) will burden Sunrun's business (which earned $26 million) going forward -- and, indeed, whether Sunrun will be able to earn a profit at all now that it's attached to Vivint.

Now what

There's no news at all that would appear to explain the even steeper declines in share price that we're seeing at Piedmont and CBAK -- so what does the prospect of Sunrun losing money have to do with Piedmont and CBAK's businesses?

Honestly, not much. Fact is, CBAK doesn't really have much of a business at this point, having lost money every year of its existence. And Piedmont, which has yet to report any revenue from lithium mining, arguably has no business at all. Neither one seems tied to Sunrun in any way.

Rather, I suspect that the declines at CBAK and Piedmont are more a result of the stocks having gone up quite a lot in recent days -- and investors not wanting to risk those gains evaporating. CBAK stock has quadrupled in price since Sept. 23, while Piedmont shares have more than tripled. Given that neither company is profitable -- but investors in both stocks have nonetheless booked a lot of profits on them -- it's not really shocking to see them wanting to take a few chips off the table and cash out today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Sunrun Stock Quote
Sunrun
RUN
$31.07 (-3.36%) $-1.08
Piedmont Lithium Limited Stock Quote
Piedmont Lithium Limited
PLL
CBAK Energy Technology, Inc. Stock Quote
CBAK Energy Technology, Inc.
CBAT
$1.22 (-0.81%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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