Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Continue Reading Below
What: Shares of solar powerhouses SunPower Corporation and First Solar jumped 18% and 14% respectively after they announced a proposed joint venture.
So what: SunPower and First Solar said they are in advanced negotiations to form a joint yieldco, a business that would own solar projects and pay owners a dividend from their cash flows. The yieldco would go public, likely later this year, but beyond that the details are sparse.
A yieldco is simply a separate publicly traded company that owns revenue-generating solar assets. It's similar to a REIT or MLP in that its goal is to maximize cash flow for shareholders. Yieldcos have become a popular way for solar companies to hold onto assets they build, earning profits over many years instead of selling them outright. For both companies, a yieldco will also give the market a way to value their project assets, which are currently hidden on the balance sheet.
Now what: There has been hope that each of these companies would launch yieldcos separately, but I actually like the fact that they're working together. The combination could bring more assets into the yieldco, diversify the company worldwide, and allow the two to work together on innovations like panel cleaning, racking, and financing offerings. I'm not sure if the pops from both stocks will last, but operationally this is a great move for both companies and I'm bullish on both over the very long term.
The article Why Shares of First Solar, Inc. and SunPower Corporation Both Popped Today originally appeared on Fool.com.
Continue Reading Below
Travis Hoium owns shares of SunPower. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.