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Vivint Solar Inc (VSLR) Snatched Up Sunedison Inc (SUNE): Did Hedge Funds See It Coming?

Sunedison Inc (NYSE:SUNE) has announced entering into a definitive agreement with Vivint Solar Inc (NYSE:VSLR) for the acquisition of the latter for $2.2 billion. Vivint Solar is known for offering solar panel installations, with the second-biggest consumer base in the U.S. One of the primary reasons for the heightening demand of their solar panels is their lease-based installation service, which keeps the installation cost lower for customers. Sunedison Inc (NYSE:SUNE) will pay $2.2 billion in a combination of cash, shares of the company, and convertible notes. As a part of the overall deal, TerraForm Power Inc (NASDAQ:TERP) will acquire the rooftop solar portfolio of Vivint Solar Inc (NYSE:VSLR) for $922 million concurrently with the acquisition of the latter by Sunedison Inc (NYSE:SUNE). While discussing the acquisition, Ahmad Chatlia, CEO of Sunedison Inc and chairman of TerraForm Power, said, “SunEdison’s acquisition of Vivint Solar is a logical next step in the transformation of our platform after the successful execution of our First Wind acquisition in January 2015.” He further added, “We expect the Vivint Solar transaction to create significant value for our stockholders through the accretion in our TerraForm Power ownership, the acceleration of our Incentive Distribution Rights and an immediate expansion of our capacity and bandwidth to grow our residential business in the U.S. and globally.”

SunEdison SUNE Solar Panels

The shares of Vivint Solar Inc (NYSE:VSLR) are trading 44.63% higher today, pushing their year-to-date growth to 70.72%. Smart money was either expecting a similar transaction or heightened performance by the company, as the aggregate investments in the solar company by the smart money tracked by Insider Monkey rose sharply in the first quarter, to $82.26 million from positions held by 14 hedge fund investors compared to $49.73 million of shares held by nine investors one quarter earlier. Shares were up by over 31% during the quarter, though this doesn’t account for the entirety of increase in aggregate value, meaning funds collectively bought shares.

We don’t just track the latest moves of funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research, with backtests for the period between 1999 and 2012 and forward testing for the last 2.5 years. The results of our analysis show that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests. Moreover, since the beginning of forward testing in August 2012, the strategy worked brilliantly, outperforming the market every year and returning 139%, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

In terms of insider trading, which we also monitor closely, Shawn Lindquist, Chief Legal Officer, Executive Vice President and Secretary at Vivint Solar Inc, sold 55,148 shares of the company on June 2.

For an in-depth understanding of the hedge fund sentiment surrounding Vivint Solar, let’s take a detailed look at the action surrounding the company.

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