Believes Evidence Clearly Shows that Sunnova's Senior Management has Obfuscated Ties to Past Failures and Fraud in SEC Filings, Including CEO William Berger's Tenure at Enron
Contends Sunnova is Being Promoted As A Hot Play On Solar Energy, but In Reality Is A Specialty Finance Business Without Meaningfully Differentiated Offerings
Shows that Sunnova is Overleveraged and Dependent on Aggressive Financial Presentation, Accounting and Non-GAAP Metrics Overly Flattering Its Performance
Underscores that a Former Sunnova Executive and Industry Experts Agree that the Company Has an Undifferentiated and Misunderstood Business Model
Spruce Point Estimates that Sunnova's Shares Face 80% Downside Risk
NEW YORK, Sept. 29, 2020 /PRNewswire/ -- Spruce Point Capital Management, LLC ("Spruce Point" or "we" or "us"), a New York-based investment management firm that focuses on forensic research and short-selling, today issued a 91-page report entitled "Is There Really Something New Under The Sun?" that outlines why shares of Sunnova Energy International Inc. (NYSE: NOVA) ("Sunnova" or the "Company") face up to 80% downside risk. The full report can be downloaded and viewed at www.sprucepointcap.com. Follow us on Twitter @sprucepointcap for exclusive updates.
Based on extensive forensic analysis and a holistic review of Sunnova's accounting practices, financial controls and reporting, and corporate governance, Spruce Point has reached a clear conclusion: although the Company markets itself as a solar energy business, the reality is that Sunnova is a highly over-valued specialty finance business that lacks differentiated offerings and operates in a very competitive industry facing significant secular headwinds.
Notably, our research reveals that Chief Executive Officer William Berger's biography curiously omits his previous role at Enron Corporation ("Enron"), which was the early 2000s Wall Street darling known for its aggressive accounting and financial reporting, which ultimately led to a historic bankruptcy and fraud charges against the Chief Financial Officer. Additionally, we uncovered that Sunnova's Chief Financial Officer Robert Lane obscured his tenure at Madison Williams in public filings, a bankrupt energy broker-dealer backed by two dubious investors. A bankruptcy trustee later referred to one of Madison Williams' investors as having, "...many of the characteristics of a Ponzi scheme."1 Spruce Point finds it incredibly worrisome that under Mr. Berger and Mr. Lane, Sunnova's non-GAAP metrics employ highly aggressive and non-standard industry assumptions that we believe are similar to financial interpretations used by Enron. Shareholders should be particularly alarmed that Mr. Berger and Mr. Lane have attempted to conceal their connections to failed enterprises. We contend that such affiliations are highly germane to any investor's due diligence and assessment of Sunnova.
Unlike its peers, Sunnova reports Adjusted EBITDA – a metric we believe should not be used to evaluate a business dependent on consumer financing – and Gross Contracted Customer Value ("CCV") – a metric based on management estimates and negligible historical data. Spruce Point contends that investors need to have serious concerns about Sunnova's apparent misclassification of its own business, promotion of aggressive metrics and deteriorating margins.
Further, we believe current sell-side analysts do not properly categorize Sunnova as a specialty finance business, leaving investors with significant downside risk as the Company's optimistic price targets are a result of valuation metrics based on misguided financial measurements. The sum of these factors supports our conclusion – also shared by a former Sunnova executive and industry experts – that Sunnova has an undifferentiated and misunderstood business model. We believe the Company faces up to 80% downside risk to a single-digit share price.
A high-level overview of some of the detailed findings in Spruce Point's 91-page report includes:
Spruce Point believes that Sunnova faces up to 80% downside risk once the market evaluates the Company for what it truly is: a specialty finance business that has been benefiting from investor euphoria for solar energy stocks.
Please note that the items summarized in this press release are expanded upon and supported with data, public filings and records, and images in Spruce Point's full report. As a reminder, our full report, along with its investment disclaimers, can be downloaded and viewed at www.sprucepointcap.com.
Spruce Point Capital has a short position in Sunnova Energy International Inc. (NYSE: NOVA) and stands to benefit if its share price falls.
About Spruce Point
Spruce Point Capital Management, LLC is a forensic fundamentally-oriented investment manager that focuses on short-selling, value and special situation investment opportunities. Spruce Point Capital Management, LLC is a member of the Financial Industry Regulatory Authority, CRD number 288248.
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