After a several-months-long internal review of its financial reporting and controls, SunEdison (SUNE) declared that its executives were "overly optimistic" about its cash forecasting, but not guilty of "fraud or willful misconduct."
Put another way, SunEdison investigated itself and found it did nothing wrong.
And yet, the stock rallied as much as 90% in premarket trading Thursday and continued rallying at the market open, even though we still know nothing about SunEdison's financial position.
SunEdison has yet to release its fourth-quarter 2015 financial statements, even though first-quarter 2016 earnings season is underway. Also worth noting, as a result of its delays, SunEdison is believed to be in technical default on as much as $1.4 billion of its $11.6 billion debt load.
SunEdison announced its internal investigation earlier this year after a former executive made allegations that questioned the accuracy of statements it made to the board about the company's anticipated financial position. Late last month, SunEdison confirmed that it was the subject of investigations on similar grounds by the Justice Department and the Securities and Exchange Commission.
SunEdison's investigation was led by the board's audit committee, independent members on the board and independent legal and financial advisors. Could there be reason to question the independence of SunEdison's investigative team? The company is currently a defendant in several lawsuits that allege SunEdison handpicked sympathetic people to serve on the boards of its yieldcos, TerraForm Power (TERP) and TerraForm Global (GLBL), late last year.
As for the conclusions of made by SunEdison's investigative team, it identified several issues in the company's cash forecasting and liquidity management practices. The team also said that the company was "overly optimistic" in reporting its financials to the board and it did not appropriately discuss risks or its missed forecasted targets.
SunEdison's SEC filing Thursday, which details the investigation's findings, reads like confessions of a kid whose hand was caught in the cookie jar. The company is still subject to investigations by regulators, which may take less kindly to the "overly optimistic" tone management conveyed to the board.
Let's not forget, the information a company provides to its board leads to actions that affect the company's future. Sugarcoating its financial position is a big deal.
On Thursday, the market may rejoice that SunEdison did not find itself guilty of financial wrongdoing, but it would be wise to wait to see financials before making investment decisions.