Needham Drops Sunedison Bomb: Assets Will Sell For 'Pennies,' Bankruptcy Is Only Possible Outcome

In a rare mid-day analysis, Needham's Edwin Mok dropped coverage of Sunedison Inc SUNE, warning that bankruptcy is the "only viable outcome" for the struggling solar company.

Mok pulled his Hold rating on Sunedison amid what he called a "cash crunch as the result of an over leveraged balance sheet and unclear accounting of its liquidity," as first reported by Barron's.

Last week, the company said it had been approached by the SEC and is under a subpoena from the Department of Justice; a separate Dow Jones report said Sunedison is prepping a chapter 11 filing.

Related Link: Picking Winners After SunEdison Crash: Canadian Solar And Solar Edge?

Mok, for his part, didn't hold anything back.

"Unfinished projects likely sold for pennies," he wrote. "A vast majority of the cash on hand is committed to projects, but SUNE does not have the liquidity to complete those projects. A bankruptcy proceeding would likely force the company to sell its project portfolio and pipeline to raise capital for debt repayment."

"The completed projects should be able to fetch market value, but given the uncertain status of those unfinished projects in its pipeline, we expect those would be sold at a substantial discount."

How did Sunedison get into this mess? "Management was relying on the combination of yieldco funding, debt project financing and its own liquidity," the analyst explained, before adding: "[T]he strategy to become the world’s largest renewable energy company through multiple acquisitions overextended SUNE’s financial liquidity and ultimately accelerated its cash crunch."

Initially rising as high as $0.42 a share, Sunedison closed Tuesday at $0.33 and is down 5 percent after-hours.