June wasn't kind to the renewable energy industry as investors wavered on how risky some of the smaller companies in the industry could be. Fisker's bankruptcy in the electric-vehicle (EV) industry meant that other renewable energy companies could eventually go down, too.
According to data provided by S&P Global Market Intelligence, SunPower's(NASDAQ: SPWR) shares dropped 11.4% in June and continued their slide in July, falling 29.7% in the first week of trading. Blink Charging(NASDAQ: BLNK) fell 11.9% last month, and Bloom Energy(NYSE: BE) was down 25%.
SunPower's news goes from bad to worse
2024 has been nothing but bad news for SunPower. The company needed a bailout by its majority owner TotalEnergies and said it will need to restate two years of financials.
To start June, the company said it had drawn $50 million from a second-lien term loan that was part of its bailout. That came with warrants for 33.4 million shares of stock at a strike price of $0.01, which will be very dilutive.
The slide continued in early July as the company announced Ernst & Young had resigned as its auditor. One of the reasons the company resigned was allegations of misconduct by senior management. This likely means former CEO Peter Faricy and other managers who left are involved because the allegations "do not relate to current senior members of management," according to an SEC filing.
What we know is that SunPower's future is up in the air. The company has drawn on financing intended to stave off bankruptcy, but its financial statements are in question. That's causing investors to run for the hills.
The drop in renewables
One of the biggest reasons renewable energy stocks have fallen in 2024 is that the market is questioning when they'll be able to make money. I highlighted that SunPower needed a bailout, but Blink Charging and Bloom Energy aren't looking much better. Net losses and cash burn are unsustainable at both companies.
BLNK Net Income (TTM) data by YCharts.
There wasn't any major news about these companies, but this is an example of the slide we've seen from most renewable energy stocks over the past month. After Fisker's bankruptcy, investors seem to be realizing that patience will run out for some companies in the industry, and those reporting major losses are feeling the brunt of the pain.
The problem is that this can be a downward spiral for some of these companies. In renewable energy, there's a constant need for financing of projects, and if the cost of that financing goes up, it's less competitive against traditional energy sources or competitors. This can cause stocks to fall and the market to lose confidence, which raises costs further.
We've seen this downward spiral of bankrupt companies over the past decade, and it could happen again.
A light at the end of the tunnel?
The good news is that demand for renewable energy is higher than ever, so companies that can get their cost structures in order could benefit. But right now, the risk is higher than ever, and companies need to get their costs in line, putting pressure on earnings for the rest of 2024.
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Travis Hoium has positions in SunPower. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
