Lawsuits against Vivint Solar 'lack merit', company says

Shares of Vivint Solar continued their nosedive this week, after a second class action lawsuit was filed alleging that the company misled investors in the run-up to its 1 October initial public offering.

While up more than 2% by 1pm on Friday, shares of Vivint Solar still looked set to end the week down nearly 20%, following news that law firm Pomerantz LLP had filed a class action lawsuit against Vivint Solar in New York federal court.

A similar lawsuit was filed several weeks ago by the Rosen Law Firm.

"We are aware that two securities class action suits have been filed by two individual plaintiffs," a Vivint Solar spokeswoman said in response to a request for information.

"We believe these complaints lack merit and we will defend the matters vigorously."

Trading at $8.11 as of midday Friday, Vivint Solar shares have lost nearly half their value since listing at $16 a little over two months ago.

Analysts warn that the poor performance of Vivint Solar shares since their listing could have chilling effect on other potential solar IPOs in 2015.

At the heart of the lawsuits is the question of whether Utah-based Vivint Solar, which trails only SolarCity in the US rooftop solar game, was completely forthright with investors in the registration statement for its IPO.

In filing its lawsuit, Pomerantz says Vivint Solar “negligently prepared” the registration statement for the IPO.

Among its complaints, Pomerantz claims that Vivint should have highlighted the emerging trend away from solar PPAs and leases in the US rooftop market, as more homeowners buy systems outright or take out loans to do so.

Third-party ownership mechanisms – like leases and PPAs – continue to dominate the residential market in many states, and are the central pillar of Vivint Solar's business.

But in some states, like California and Arizona, the TPO model is already beginning to wane, and analysts expect it to continue losing market share in the years ahead, albeit gradually.

Speaking to Recharge shortly after the IPO, Vivint Solar chief executive Greg Butterfield said the company was considering moving beyond leases and PPAs.

“Going forward, I’d anticipate that we’d come out with some new products,” Butterfield said. “There might be some people who want to buy.”

“It seems logical that as we scale we’d have other options,” he said, adding that he had “nothing to announce” with regard to loan products for the time being.

One week after Vivint Solar's IPO, SolarCity announced it would begin offering solar loans to homeowners.

Vivint Solar has not publicly addressed the lawsuits. On Friday the company announced plans to open 20 new sales and operations offices in 2015, including pressing into unnamed new states.

Vivint's shares fell sharply in the weeks after its IPO, but by early November had more or less rebounded. But on 10 November the company announced its third-quarter results -- its first set of results as a public company -- and the shares began to plunge once again.

Analysts were disappointed by Vivint forecasting sequentially falling deployments and revenues in the final quarter of 2014, which it blamed on seasonality.

While Vivint Solar’s shares have had an especially awful month, the company is by no means alone within the PV industry in seeing its share price tumble.

Quite aside from the merits of any of the lawsuits, it is clear that Vivint Solar was unfortunate in the timing of its IPO. Since September, nearly all major public solar companies have lost considerable value, due in part to tumbling oil prices, which have dragged shares across the energy sector downward.

Shares in SolarCity, Vivint’s larger rival, have fallen by more than 32% in the past three months.

Shares in First Solar, the largest US PV manufacturer and project developer, are down nearly 42% in that period, while shares of Trina Solar, the world’s largest solar manufacturer, have fallen 38%.