What: Shares of SunEdison Inc (NASDAQOTH:SUNEQ) dropped another 32% on Friday, continuing a nightmarish week for the stock.
So what: Yesterday, shares fell because a judge barred the company from making unusual transfers of money because of a lawsuit by Latin America Power. Today, investors are preparing for Tuesday's suit by David Tepper's Appalossa Management, who is trying to keep TerraForm Power (NASDAQ:TERP) from buying residential solar assets as part of the Vivint Solar acquisition.
If Tepper is successful in blocking TerraForm from buying residential solar assets and SunEdison is forced to complete the acquisition it could suck up all of the company's liquidity. Potentially, bankruptcy could be the next step. Since Tuesday is the day of reckoning and this is the last day of trading before the hearing, investors are getting out now.
Now what: SunEdison and TerraForm Power are both stocks that average investors should stay far away from. Odds are growing everyday that SunEdison will eventually file for bankruptcy and Tuesday could be a tipping point if the court rules against the company. I'd watch from a distance because the risk to the downside is too high for SunEdison right now.
Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.