Shares of SunPower Corp. experienced a significant drop of over 30% on Monday after the residential solar company issued a going-concern warning in its regulatory filings.
SunPower's stock (SPWR) plummeted 34% to $4.09, which is on track to be its lowest closing price since November 28. This marks the largest one-day percentage decrease for the company since November 5, 2008, when it fell by 35%.
Unfortunately, SunPower's stock has declined 77% this year, making it poised to have its worst annual performance since 2016 when it dropped by 78%. In comparison, the S&P 500 index (SPX) has seen gains of about 23%, while the Invesco Solar exchange-traded fund TAN saw a decline of around 30% during the same period.
In today's filings, SunPower revealed a breach of covenant due to a delay in submitting its 10-Q report. Consequently, the company's third-quarter filing now includes going-concern language, cautioning investors about the potential immediate debt repayment of $65.3 million in the event of a failure to reach an agreement with lenders.
Truist analyst Jordan Levy addressed the issue in a note to clients on Monday, stating, "Ultimately, while SunPower continues to work with creditors to resolve multiple covenant breaches, we anticipate that the elevated credit risk and potential for dilution will continue to put downward pressure on shares."
As of the end of the third quarter, SunPower had approximately $116 million in cash and equivalents.
In response to the situation, SunPower revealed in its filings that it is actively seeking additional waivers and exploring various funding alternatives, including potential equity raises or partnerships with strategic allies.
Levy also expressed concerns about the company's near-term cash flows, particularly with the expectation of an increase in inventory during the current quarter.
In addition to its internal challenges, SunPower, together with other solar-power stocks, has faced pressure from higher interest rates and regulatory changes in certain states, such as California, which have extended payoff schedules for residential solar power.
Last month, SunPower reported third-quarter sales that failed to meet Wall Street's expectations, and the company swung to a quarterly loss.
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