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Why Brookfield Renewable Corporation Tumbled More Than 17% in February

By Matthew DiLallo - Mar 8, 2021 at 10:21AM

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The renewable energy company is reverting closer to the mean.

What happened

Shares of Brookfield Renewable Corporation (BEPC -1.64%) slumped 17.5% in February, according to data provided by S&P Global Market Intelligence. The renewable energy stock experienced a deeper decline than its sibling Brookfield Renewable Partners (BEP -1.70%), which slipped only 6.8% last month. 

So what

Brookfield Renewable Corporation has been a hot commodity since Brookfield Renewable Partners formed that entity last year to appeal to a broader investor base: 

BEPC Chart

BEPC data by YCharts.

As that chart shows, Brookfield Renewable Corporation's shares have significantly outperformed units of Brookfield Renewable Partners since the spin-off. That divergence came even though they're economically equivalent entities. The main factor powering the outperformance was investor preference. Demand was higher for the corporate entity than the partnership because it's easier to own it in a tax-advantaged account like an IRA

That led their parent, Brookfield Asset Management (BAM 0.15%), to cash in on some of its Brookfield Renewable Corporation shares by completing a secondary offering last month. It sold 15 million shares at $51.50 apiece to provide the market with more liquidity. The offering weighed on the price of the corporate shares. 

Brookfield Renewable also reported its fourth-quarter results last month. The company posted double-digit increases in power generated and cash flow thanks in part to recent acquisitions. It also boosted its dividend by 5% and continued to secure new growth opportunities.

Two people in hard hats look at a row of wind turbines. One of the people is holding a laptop and pointing toward the turbines.

Image source: Getty Images.

Now what

Brookfield Renewable created a corporate entity to broaden its investor appeal, which worked so well that the new entity trades at a premium to the partnership. The price difference narrowed last month as their parent sold some shares to increase their public availability. That won't have any long-term impact on the underlying business, which continues to hum along as it captures opportunities to create value in the renewable energy megatrend.

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Stocks Mentioned

Brookfield Renewable Corporation Inc. Stock Quote
Brookfield Renewable Corporation Inc.
$34.18 (-1.64%) $0.57
Brookfield Asset Management Inc. Stock Quote
Brookfield Asset Management Inc.
$47.78 (0.15%) $0.07
Brookfield Renewable Partners L.P. Stock Quote
Brookfield Renewable Partners L.P.
$33.57 (-1.70%) $0.58

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

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