How Have Other Solar Stocks Traded Amid The Sunedison Drama?

Shares of Sunedison Inc SUNE are down nearly 40 percent this week following reports that the company is in Debtor-in-Possession (DIP) negotiations with second lien holders after out-of-court talks concerning the company’s liquidity and leverage issues apparently broke down. The market seems to believe that the news is an indication that a bankruptcy could be imminent for Sunedison.

“Via a Chapter 11 Bankruptcy filing, a distressed company who is unable to obtain a new loan outside of bankruptcy may use DIP financing to get the liquidity necessary to run a sale process or finance a formal Chapter 11 restructuring,” Axiom analyst Gordon Johnson explains.

Related Link: The Beginning Of The End For Sunedison? Gordon Johnson Speculates

The potential for a Sunedison bankruptcy has sent shockwaves through the solar industry. Sunedison fears have sparked 4-6 percent selloffs in SunPower Corporation SPWR and First Solar, Inc. FSLR and a major 14.7 percent selloff in SolarCity Corp SCTY this week alone.

Sunedison shares are now down an incredible 94.6 percent in the past year, but Johnson sees more room to the downside even after the aggressive selloff. Johnson's $0.22 price target represents another 83 percent downside for a stock that was trading in the upper $20s less than a year ago.

Disclosure: the author holds no position in the stocks mentioned.