PECK and SUNW have been two of the most talked-about names lately among penny stock investors. June and July were great months for penny stock traders; however, August wasn’t that great while September was so-so. PECK and SUNW have been two bright spots as both stocks have given investors multiple opportunities to profit. For those that missed the initial spikes, there was the opportunity to load up on SUNW at $2 and PECK at $7.
In this article, we take a look at both PECK and SUNW. We get the story behind the two companies and why the stocks keep turning into runners.
PECK and SUNW
First up, here’s a little background info on PECK and SUNW.
Headquartered in South Burlington, VT, The Peck Company Holdings, Inc. is a 2nd-generation family business founded in 1972 and rooted in values that align people, purpose, and profitability. Ranked by Solar Power World as one of the leading commercial solar contractors in the Northeastern United States, Peck provides EPC services to solar energy customers for projects ranging in size from several kilowatts for residential properties to multi-megawatt systems for large commercial and utility-scale projects. Peck has installed over 160 megawatts worth of solar systems since it started installing solar in 2012 and continues its focus on profitable growth opportunities.
Sunworks, Inc. is a premier provider of high-performance solar power systems. Sunworks continues to grow its presence, expanding nationally with regional and local offices. Sunworks strives to consistently deliver high-quality, performance-oriented solutions for customers in a wide range of industries including agricultural, commercial and industrial, state and federal, public works, and residential.
PECK and SUNW Merger
In August, PECK and SUNW agreed to merge. The deal called for PECK acquire Sunworks in an all-stock transaction, pursuant to which each share of Sunworks common stock will be exchanged for 0.185171 shares of Peck common stock (subject to certain adjustments). Assuming no adjustments, Sunworks’ stockholders would receive an aggregate of approximately 3,079,207 shares of Peck common stock, representing approximately 36.54% of Peck common stock outstanding after the merger.
The two companies cited the rationale behind the merger as follows:
- The combination creates a national leader with a coast-to-coast presence poised to capitalize on significant cost synergies.
- Improves scale and strengthens national presence, with pro forma revenue of $88 million if the companies had been combined in 2019, and a combined backlog of $76.8 million if the companies had been combined as of June 30, 2020.
- Management has identified approximately $6 million in anticipated annualized cost synergies, including supply chain management leverage, redundant public company costs, and various operating expenses.
- The transaction is expected to be accretive to earnings and free cash ﬂow after integration synergies have been implemented.
- The combined company will have a significantly expanded the addressable market to leverage Sunworks’ core capabilities in agriculture and public works.
- The combination leverages Peck’s strategic partnership with GreenBond Advisors to provide project development and financing to fuel growth and solar project ownership improving the conversion of Sunworks’ pipeline and expanding its addressable market.
- Peck and Sunworks installed a combined 62,973kW in 2019, which would rank 41st overall and would be the 16th largest EPC contractor based on the latest Sun Power World ranking list.
PECK and SUNW Closing
The transaction is expected to close during the fourth quarter of 2020, subject to approval by shareholders of both companies and other customary closing conditions. The Board of Directors of Peck and Sunworks have each unanimously voted in favor of the definitive transaction agreement.
As part of the agreement, after the transaction closes, Jeff Peck will continue as Chairman of the Board and Chief Executive Officer of the combined company. The Board of Directors of the combined company will be comprised of four members of the Peck Board of Directors and three members appointed by the Sunworks Board of Directors.
PECK and SUNW Controversy
Both PECK and SUNW traded lower after announcing the deal. A few ambulance-chasing lawyers jumped on the bandwagon as the deal valued SUNW at a 31% discount to where shares had traded prior to the announcement. At least seven law firms have filed suit.
PECK and SUNW Merger Makes Sense
The fact is the merger between PECK and SUNW makes a lot of sense. Both companies are too small to remain independent. By combining, they can save roughly $6 million a year in administrative costs. Furthermore, the acquisition provides Peck’s cash to support Sunworks’ projects, and Peck’s strategic partnership with GreenBond Advisors to provide project development and financing. Sunworks didn’t previously have access to GreenBond financing.
SUNW New Contracts
On October 7th, SUNW announced $10M in new Q3 commercial and agriculture projects, marking its strongest quarterly booking activity since the start of the pandemic. The sales are comprised of 19 existing and new customers and a total of more than 4.4 MW for installation. Sunworks says the most notable volume of Q3 sales was booked in the final week of September, and the company signed two more large projects in the first week of October.
New projects awarded in the third quarter include $3.2 million for modular home sites in both Northern and Southern California; a $1.8 million follow-on project for a large agriculture customer and a $1.4 million project for a new agriculture customer; and a follow-on sale totaling $0.7 million in the Northeast for Cibao Meat Products, who will be building a 154kW parking canopy that will include 8 EV charging stations.
PECK New Contracts
Not to be outdone, PECK is also getting new contracts. On October 7th, PECK announced that it was expanding into Rhode Island with the signing of a 5.3 MW contract, from a long-time customer; this adds to the recent news about expansion into Maine. The $7.25M contract for a project located in Rhode Island is expected to be completed by 1Q21.
PECK An Original SPAC
PECK was a SPAC before most investors had even heard of the term. Chairman Jeffrey Peck said:
“Since we listed on Nasdaq through a SPAC merger, we (1) delivered organic growth of revenue from $16 million to $28 million in the first year, (2) partnered with GreenBond Advisors to access capital that provides EPC revenue as well as asset ownership in the solar projects we build for the partnership, and now (3) we are delivering on the third prong of our strategy with an exciting accretive acquisition. We have been focused on executing these important initiatives for our shareholders and expect the acquisition of Sunworks to provide many more opportunities for long term growth and profitability.”
We try not to discuss politics here at Insider Financial, but we have to. Understanding the political dynamics and how it can shape your fortune is very, very important. According to the leading betting sites, which we trust more than polls because people are actually placing wagers with their hard-earned money, Joe Biden’s chances of becoming the next President are over 60%. His policies will be more renewable energy and fewer fossil fuels.
A Biden/Harris victory is perfect for PECK and SUNW. As PECK states in its mission statement:
The Peck Company Holdings is guided by the mission to facilitate the reduction of carbon emissions through the expansion of clean, renewable energy and it believes that leveraging such core values to deploy resources toward profitable business is the only sustainable strategy to achieve these objectives.
PECK, SUNW, and other solar shares have been strong recent performers on optimism around a potential Biden presidency. If you look at the charts of Sunrun (RUN) and JinkoSolar (JKS), the moves in PECK and SUNW could just be getting started.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NASDAQ:PECK, NASDAQ:SUNW, or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.