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Why Vivint Solar Inc.'s Shares Tanked 66% in March

By Travis Hoium - Apr 7, 2016 at 11:45AM

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Nothing seemed to go right for Vivint Solar last month.

Image source: Vivint Solar.

What: Shares of residential solar company Vivint Solar Inc. (VSLR) dropped a whopping 66% in March after a heap of bad news fell on the company.

So what: First, Vivint Solar ended its merger agreement with SunEdison, which wasn't surprising by the time it happened. SunEdison was clearly careening toward bankruptcy, which could come any day, and it was clear that it wouldn't be able to pay the agreed price for Vivint Solar. After the merger was called off, Vivint Solar sued SunEdison for willful breach of their merger agreement.

A few days later, Vivint Solar reported fourth-quarter earnings, which failed to impress anyone. Installations grew just 17% from a year ago and cost per watt of $3.12 is significantly higher than that of SolarCity, the company's biggest competitor.  

To make matters even worse, Vivint Solar announced it had received $200 million in financing, which came in the form of a $75 million tranche at LIBOR plus 5.5% and $125 million at LIBOR plus 8%. Those rates are much higher than competitors are getting, which will make it hard for Vivint Solar to make money financing solar projects.  

Now what: All of this news points to a rough future for Vivint Solar. Installation costs are lagging the competition and high financing costs will make it tougher to compete. Until those two trends turn around, this isn't a stock for the faint of heart. There's a lot of potential for Vivint Solar long term, but a lot has to go right for the company to be a winner for investors.

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