Please ensure Javascript is enabled for purposes of website accessibility

Why TerraForm Global Inc.'s Shares Dropped 19% Today

By Travis Hoium - Feb 25, 2016 at 4:21PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A big debt downgrade didn't sit well with TerraForm Global Inc. investors today.

Image source: SunEdison.

What: Shares of TerraForm Global Inc. (NASDAQ: GLBL) plunged as much as 19% in late trading after the company's debt was downgraded.

So what: Moody's recently downgraded its outlook on TerraForm Global, saying that bankruptcy was a possibility if parent SunEdison had to file for bankruptcy. The prepayment of $231 million to SunEdison for 425 MW of projects in India that are not completed and four originally planned acquisitions haven't yet been completed.  

Near term, the company should be able to operate with an estimated $800 million in cash, but the uncertainty for TerraForm Global and its ties to SunEdison can't be overlooked.

Now what: Yieldcos are supposed to be safe renewable energy investment with long-term contracts, but TerraForm Global is turning out to be anything but safe. The stock's dividend is now 25%, implying that investors don't believe that's going to last, and the fact that Moody's brought up the possibility of bankruptcy is concerning. I would be very cautious with this stock because its ties to SunEdison could be a fatal flaw in the long run. Even with the enticing dividend, I wouldn't be a buyer today.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.