Sungevity reveals plan to list shares on Nasdaq

Sungevity, the largest privately owned US rooftop solar company, may soon be joining rivals SolarCity, Sunrun and Vivint Solar on the public markets.

In an unusual and unexpected deal, Oakland, California-based Sungevity has agreed to merge with Easterly Acquisitions Corp., a special purpose acquisition company, and list shares on the Nasdaq exchange under the ticker symbol SGVT.

The IPO plans have been approved by Sungevity’s board of directors, and if the company’s shareholders give a thumbs up later this year, investors will be able to buy and trade shares of Sungevity sometime later this year.

Sungevity’s IPO would be the biggest in the US solar industry since Sunrun went public last summer, and would give it additional financial firepower as it seeks to expand both in the US and within overseas markets like Germany. German utility E.ON is an investor in Sungevity.

Publicly-listed Easterly Acquisitions – backed by asset-management firm Easterly LLC – will put about $200m into the newly merged company, which would be called Sungevity Holdings and is expected to have an initial market capitalization of around $607m. That’s larger than the current market caps of both Sunrun ($600m) and Vivint Solar ($336m), though still substantially smaller than SolarCity’s $2.5bn.

Industry observers may find the timing odd, given the brutal pressure that US rooftop solar companies currently face in the stock market. Vivint Solar and Sunrun have both lost more than half of their value since going public, in 2014 and 2015 respectively, and SolarCity shares are down more than 52% in 2016 alone – Tesla’s recent buyout offer notwithstanding.

But Sungevity emphasizes that its “asset-light” business model is very different than those other companies, focusing instead on offering a software platform that seamlessly connects homeowners, module installers, and financiers.

Sungevity says it “outsources” work like sales-lead generation, rooftop installation, and equipment procurement, which “stands in in sharp contrast to the capital-intensive, asset-driven and vertically integrated model now ubiquitously deployed in today’s downstream solar market”.

Under the terms of the proposed merger, all of Sungevity’s outstanding equity and debt would be converted into shares of Easterly’s common stock. Sungevity’s existing management team would continue to lead the newly merged company under current chief executive and co-founder Andrew Birch.

Greater access to finance will not only help Sungevity expand its market share in the fiercely competitive US residential market; the company has also been an early mover into European markets like Germany and the UK, thanks in part to the backing of E.ON. Sungevity’s model allows it to scale more rapidly in new markets than rivals that need to hire and train sales and installation teams.