NEW YORK (TheStreet) -- SunEdison (SUNE) stock is skyrocketing by 43.60% to $2.47 in early-morning trading on Friday, after a judge ruled against David Tepper's challenge to the company's proposed acquisition of Vivint Solar (VSLR).
Under the terms of the merger, SunEdison's TerraForm Power (TERP) yieldco is supposed to buy 470 megawatts of Vivint's assets for $799 million, but David Tepper's Appaloosa Management sued in an attempt to block the purchase.
The hedge fund, which owns a 9.5% stake in TerraForm Power, argued that the transaction benefits SunEdison more than the yieldco.
However, Delaware Chancery Court Judge Andre Bouchard has ruled that Appaloosa Management "couldn't prove" that the terms of the merger would harm TerraForm Power shareholders, and refused to issue an injunction barring the deal. Bouchard nonetheless warned that SunEdison faces "serious questions" about the fairness of the purchase, Bloomberg notes.
"The deal's going to go through at this point," Michael Morosi, an analyst at Avondale Partners, told Bloomberg. "Now, it's up to SunEdison to execute. They're picking up a business that's been distracted for seven months."
Additionally, SunEdison shares spiked as much as 38% on Thursday after Vivint shareholders approved the $1.9 billion acquisition by SunEdison in a vote of 100 million to 101,000, Bloomberg reported.
Insight from TheStreet's Research Team:
While investors are celebrating the deal, they weren't liking it when it was announced back in July. In the chart below, which was pulled for Thomson Reuters, you can see that while shares of SunEdison are down 92% over the last year, much of that drop occurred just as the Vivint deal was announced in July.
At the time, investors felt SunEdison was biting off more than it could chew and that Vivint's portfolio of residential projects was of inferior credit quality compared to SunEdison's more commercial projects.
To be sure, terms of the Vivint deal were amended in December. Among the changes to the original deal, SunEdison was able to lower the cash amount it was paying to Vivint by $2 a share. While the economics were better, Appaloosa Management, which had a stake in SunEdison's yieldco, TerraForm Power (TERP), took issue with aspects of the proposed deal that would require TerraForm Power to purchase Vivint's projects from SunEdison.
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Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D.
SunEdison's strengths weaknesses include its generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
You can view the full analysis from the report here: SUNE
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.