SunPower's stock slides 19% as restatements may impact covenants on loans

By Ciara Linnane

SunPower is restating financials for six quarters after errors in accounting for components at third-party locations

SunPower Corp.'s stock tumbled 19% Wednesday, after the company said it would restate financial statements for the last six quarters after discovering errors that may impact covenants on some of its borrowings.

The stock was on track for its biggest one-day percentage decline in more than three years. Volume of 8.2 million shares traded by early afternoon was above the 65-day average of 5.2 million.

The maker of solar panels (SPWR) said statements in its 10-K for the year through Jan. 1, and the first and second quarters of 2023, along with any statements that are based on them, can no longer be relied on.

"In connection with the preparation of the financial statements, the company preliminarily determined that the value of consignment inventory of microinverter components at certain third-party locations had been overstated in the affected periods in the range of approximately $16 million to $20 million, resulting in the associated cost of revenue being understated," the company said in a filing with the Securities and Exchange Commission.

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The company has not completed its review and the financial impact of the errors is preliminary and subject to change, said the filing.

Management has determined that the company's disclosure controls and procedures and internal control over financial reporting were not effective as of Jan. 1, and its auditor, Ernst & Young, will revise its opinion to an adverse one for that period.

SunPower is also in talks with its creditors and is seeking to negotiate terms of a consent and waiver to address the effects of the restatement on its credit agreement.

Truist said it expects the company to receive the needed waiver and expects liquidity has improved in the latest quarter. Under the terms of its credit agreement, liquidity must remain above a $100 million threshold.

"According to our forecasts, we expect total liquidity under SunPower's credit agreement to be $154MM for the third quarter," analysts led by Jordan Levy wrote in a note to clients.

The company had about $134 million in liquidity in the second quarter. Truist has a hold rating on the stock.

Oppenheimer analysts agreed the company will likely reach agreement with its lenders, "without severely restricting its business.

"Given liquidity issues across the solar space, we see SunPower as having committed, long-term financial partners which are likely to work with the company on mutually agreeable solutions,' analysts led by Colin Rusch wrote in a note.

Oppenheimer has a perform rating on the stock.

Other solar stocks were also sharply lower on Wednesday, extending a weak run for the sector amid recently renewed investor concerns that interest rates would stay "higher for longer."

Sunrun Inc.'s stock (RUN) was last down 7.9%, while Sunnova Energy International Inc. (NOVA) was down 5.9%. SolarEdge Technologies Inc. (SEDG) was down 4%, Generac Holdings Inc. (GNRC) was down 1.9%. Shoals Technologies Group Inc. (SHLS) was down 3%.

The Invesco Solar ETF TAN fell 3.7%.

SunPower's stock has fallen 77% in the year to date, while the S&P 500 has gained about 11%.

-Ciara Linnane

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10-25-23 1306ET

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