A filing with the SEC released this week revealed that billionaire Dan Loeb of Third Point has bailed on his investment in Enphase Energy Inc (NASDAQ:ENPH). Loeb’s fund reported holding no shares of the company as of May 11, after having owned just under 6.25 million shares on March 31, a position worth $8.56 million.
The filing revealed that the majority of shares were sold on May 11 for just $0.80, a mere fraction of the amount Loeb’s firm originally paid for them five years ago, when they were trading around the $6-$8 level. Loeb timed his first sale of the stock well, selling off 17% of his original position in the third-quarter of 2014, the same quarter that shares peaked at nearly $17 in September. However he continued to hold onto the remainder of the position throughout a dreadful 2015 that saw shares fall from $14 at the start of the year to $3 by the end of it. It appears that Enphase Energy Inc (NASDAQ:ENPH)’s sobering earnings call on May 9 was the straw that finally broke the investment’s back, as the fund began selling shares that day and had ditched the position entirely by May 11.
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Needless to say, Enphase Energy Inc (NASDAQ:ENPH)’s Q1 earnings report was rather dreadful. Revenue came in at just $54.8 million, widely missing the company’s own guidance of between $60 and $65 million, which itself was already on the low side. Gross margin also widely missed the company’s own expectations, coming in at just 13% compared to guidance of between 16% and 20%. CEO Paul Nahi blamed the heavy rains in California for the results, quoting Source Data as stating that just 21 of the 65 working days in the state during the quarter were suitable for solar installations.
The severe underperformance is putting major strain on the company’s balance sheet, with its Q1 CFFO registering a deficit of $24.5 million, with CapEx being $3.5 million. Considering the company had just $29.5 million in cash on March 31, it will likely need to make a highly dilutive share offering in the near future to raise enough working capital to get it through the third-quarter and beyond.
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The good news for Enphase is that it has potential salvation on the horizon in the form of AC modules which will incorporate its IQ microinverters, which will begin seeing release in July. The company has claimed that it already has tens of thousands of orders for its microinverters lined up with its ACM partners LG, JinkoSolar Holding Co., Ltd. (NYSE:JKS), and SolarWorld, which will provide the company with a badly needed revenue boost. The big question is, will the company’s cash hold out long enough for its resurgence to take shape, or will it be forced into a buyout or bankruptcy?
After hanging on to the stock for this long only to finally bail at an all-time low after the latest financial results were released, we have to believe that Dan Loeb is firmly on the side of those who believe the company is nearly out of time.
Be sure to check out Third Point’s holdings page for a full, up-to-date listing of the fund’s 13F portfolio positions as of March 31 and click the ‘Get Email Alerts’ button on that page to get portfolio and story updates related to Third Point directly to your inbox the moment they happen.