Short Seller Muddy Waters Hits Sunrun With Bear Report - What's Going On?

Sunrun Inc RUN stock is trading lower Wednesday after Muddy Waters gave its short call on the stock.

The firm's initial thesis focused on the highly dubious Subscriber Values and Earning Assets, the report said.

Muddy Waters noted that Sunrun has dramatically exaggerated its (non-GAAP) Subscribers for years, with the current overstatement seemingly close to five quarters of reported deployments. 

Sunrun has been claiming and selling tax credits on these inflated numbers, per the analyst. The amount of possible excess tax credits for 2022 alone could be ~$200 million.

Sunrun finances and sells residential rooftop solar systems. It finances 80% of its systems either as PPAs or leases and classifies these systems as Subscribers. 

As of June 30, 2023, Sunrun purportedly had 724,784 Subscribers (PPAs and Lessees), the report said.

Even using EIA's Net Metering metric, (non-GAAP) Subscribers present a 12.0% overstatement as of Q2 2023, implying about three-quarters of (non-GAAP) Subscriber additions.

As of June 30, 2023, Sunrun reports Subscribers 20.9% higher than the U.S. Energy Information Agency ("EIA").

The report flagged that Sunrun has consistently reported higher Subscribers than EIA Net Metering and sales and revenue by ~20% on average.

Interestingly, Sunrun's growth in gross solar assets per Subscriber has consistently been much lower.

Muddy Waters' balance sheet approach invalidated Sunrun's (non-GAAP) Subscriber numbers based on a ten-quarter comparison.

The report also noted that in 2022, Sunrun claimed ITCs of approximately $205 million on 14,390 systems that did not exist.

Benzinga has contacted Sunrun for comments.

Price Action: RUN shares traded lower by 8.48% at $8.85 on the last check Wednesday.