Image source: SunEdison.

What: The drama surrounding SunEdison Inc. (SUNEQ) continued on Monday, and it now appears that the lawsuit between SunEdison and Appaloosa Management is headed to an expedited trial. Shares of SunEdison dropped as much as 16% on the news today, but its yieldcos, TerraForm Power Inc. (TERP) and TerraForm Global Inc. (NASDAQ: GLBL), climbed 10% and 23%, respectively.

So what: Appaloosa is a hedge fund run by billionaire David Tepper that is suing to block TerraForm Power from buying residential solar assets in connection with SunEdison's acquisition of Vivint Solar (VSLR). Last week, that lawsuit took a step backward when a Delaware judge didn't allow an injunction to block the asset transfer. At the time, it appeared that the Vivint Solar acquisition would go through as planned, meaning TerraForm Power would end up buying the residential solar assets.

But Appaloosa today said that it would accept the court's invitation for an expedited trial and the court gave warnings to SunEdison and even Goldman Sachs, an investment banker in the transaction. 

Details of the ruling came out in a press release today, and they don't look good for SunEdison. The court won't block the Vivint Solar acquisition, but it essentially said it could undo any transaction if Tepper wins its case and TerraForm Power is deemed to have inappropriately agreed to a transaction. The court said parties shouldn't "underestimat[e] this Court's power to grant relief in the future if it is warranted." It even said "Goldman [Sachs] ... should consider itself on notice of the possibility of relief being granted in [Appaloosa's] favor at a future date, if it is warranted."   

On top of those warnings, the court said that processes to approve the acquisition and advisors on the conflicts committee brought up major questions about the fairness process.

Shares of TerraForm Global jumped today because if Tepper wins, it could strip some of the ties it has to SunEdison. You could make the same argument that SunEdison has used TerraForm Global as a piggy bank, and if the board of directors and transaction process is changed because of this lawsuit, that could be a win for TerraForm Global.

Now what: It may have seemed like good news that an injunction wasn't granted, but the court doesn't appear to be leaning in SunEdison's favor in this lawsuit. In fact, Tepper's concerns about governance and the sale process appear to be well founded based on the comments above.

Even after the apparent win last week, I wrote that SunEdison was far from being out of the woods. This is just a glimpse of the risks still associated with the company. If the Vivint Solar transaction has to be closed without TerraForm Power, it could lead to a liquidity crisis at SunEdison and brings up the possibility of bankruptcy. That's now back on the table, and given the risks to SunEdison, I wouldn't get anywhere near the stock.