A plan by rooftop solar company Sungevity Inc to tap the public markets withered as investors fretted about the dismal performance of solar stocks and an incoming U.S. president who has expressed skepticism about renewable energy, according to executives at Sungevity and its would-be buyer.
The Oakland, California-based company in June agreed to be bought by a shell company called Easterly Acquisition Corp (EACQ.O) for about $357 million. But Easterly, set up as an acquisition vehicle by private equity firm Easterly Capital, disclosed in a U.S. Securities and Exchange Commission filing on Tuesday that it terminated the merger agreement on Dec. 31.
The deal would have allowed Sungevity to grow more quickly, executives said in June. The company's market share has hovered between 1 and 3 percent for a few years, according to GTM Research, far behind rivals including Tesla Motors Inc's (TSLA.O) SolarCity and Vivint Solar Inc (VSLR.N).
But solar proved to be a tough sell to investors last year. The MAC Global Solar index .SUNIDX slid 45 percent in 2016, as the industry experienced slowing growth in top rooftop markets like California. In addition, state policies are becoming less generous for rooftop solar customers.
"We concluded it was not the right time to pursue a merger with Sungevity for a host of reasons, including changes in the marketplace regarding the valuations of renewable energy companies," Easterly Chairman Darrell Crate said in an emailed statement on Wednesday.
Sungevity Chief Executive Andrew Birch said the company's simple business model of linking homeowners with installers and financing through an online platform had received support from the investment community. The approach differs from SolarCity, for instance, in that Sungevity does not have large numbers of sales and installation employees on its payroll, a model Birch likened to the ride sharing service Uber.
The election of Donald Trump, however, added a level of uncertainty that investors could not stomach, Birch said. Trump is a climate change skeptic who has expressed doubts about the role of solar and wind in the U.S. energy landscape, calling both "so expensive."
"We lost the attention of investors," Birch said. "There is a good amount of uncertainty until Trump gets into office and his team starts describing what their policy plans are."
The deal's failure was not related to Sungevity's financial performance, Birch said, adding that the company was "very close" to being profitable.
(Reporting by Nichola Groom in Los Angeles; Editing by Matthew Lewis)