Sunrun is worth up to 90% less than what it tells the Street: short seller

Sunrun Inc (NASDAQ: RUN) is up more than 40% since Senator Joe Manchin got behind the “Inflation Reduction Act of 2022” that aims to pump $369 billion into clean energy solutions.

Muddy Waters short sells Sunrun stock

Still, Muddy Waters Research warns the residential solar panel and battery storage company is worth up to 90% less than what it tells the Street. On CNBC’s “Squawk Box”, Carson Block – CEO of the due diligence-based investment firm said:

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Sunrun tells investors that after all of this debt is removed, there’s significant value to the equity holders. They get there through highly aggressive modelling, assumptions that just are not believable.

“Run” is already down roughly 10% for the year but he’s convinced the stock has “a lot” more downside from here.

Sunrun is scheduled to report its financial results for the second quarter on Wednesday. Analysts expect it to post 12.6 cents of per-share loss on a 25% YoY increase in sales.

Sunrun’s fundamentals are overstated

Fundamentally, the chief executive added, Sunrun is a fragile company with “overstated” Subscriber Value and Assets. Carson also has a bone to pick with how the Nasdaq-listed firm claims tax credits.

They forecast the investment tax credit they’ll get and then they go and say, hey, give us a tax credit on that tax credit. This recursive way of valuing tax credit, it’s farcical to state that this is what Congress intended.

Sunrun will have to issue more stock to fill the funding gap of 50 cents per watt, he concluded. Muddy Waters Research has a history of being right on its short bets.  

Also on Tuesday, legendary short-seller Jim Chanos raised questions on the “fundamentals” and Net Present Value of the San Francisco-headquartered Sunrun Inc.