SunEdison's Semiconductor IPO Starts Trading - Analyst Blog

SunEdison's SUNE divested semiconductor business, SunEdison Semiconductor Ltd., debuted on Nasdaq Global Select Market on May 22, 2014, with the ticker symbol ‘SEMI.'

SunEdison Semiconductor had offered 7.2 million shares at $13.00 per share and raised approximately $93.6 million with the IPO. The company's shares touched a high of $16.04 on the day and settled at $15.00 at the end of the trading session. On Friday's trade, shares of SEMI were up 3.7%.

A division of Samsung had already committed to spend up to $100 million to purchase additional shares in SEMI. Business Journal reported that the number of shares Samsung is buying is in fact $7.1 million, which at the IPO price comes to about $92.3 million.

SunEdison Semiconductor manufactures silicon wafers for the semiconductor industry and lists STMicroelectronics STM, Taiwan Semiconductor Manufacturing Co. TSM and Samsung as its customers.

SunEdison decided to divest its semiconductor business in order to focus on its core solar power business. The decision was also prompted by the lower-than-expected demand for its semiconductor wafers.

It is worth noting that SunEdison reported an 11.3% year-over-year decline in revenues from its semiconductor business in the last-reported quarter. At the same time, the solar business did exceptionally well, growing 86.8%.

Solar project sales have picked up due to increased PV installations across the U.S., China, Japan, India, Middle East, Africa, Latin America, Australia and Southeast Asia. The surge in demand from these regions could mitigate lower demand in Europe, thus helping the global solar industry grow.

Though SunEdison's growing exposure to the solar energy market is encouraging, project development requires considerable time and investments. Hence, any delay or inability in selling these projects at desired prices could have an impact on liquidity.

Moreover, SunEdison has a highly leveraged balance sheet. The company exited the first quarter with cash, cash equivalents and restricted cash of $526.6 million compared with $643.6 million in the previous quarter. Long-term debt (excluding current portion) was $3.49 billion.

Currently, SunEdison has a Zacks Rank #3 (Hold). A better-ranked stock worth considering is SanDisk Corp. SNDK , which sports a Zacks Rank #2 (Buy).

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