IPO Report: Sunrun (RUN)

Francis Gaskins |

Based in San Francisco, CA, Sunrun (RUN) scheduled a $251 million IPO on Nasdaq with a market capitalization of $1.4 billion at a price range midpoint of $14 for Wednesday, Aug. 5, 2015.

Six other companies are scheduled for the week of Aug. 3. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: Credit Suisse, Goldman Sachs, Morgan Stanley
Co-managers: BofA Merrill Lynch, RBC Capital Markets, KeyBanc Capital Markets, SunTrust Robinson Humphrey

End of lockup (180 days): Monday, February 1, 2016
End of 25-day quiet period: Monday, August 31, 2015

Sunrun Valuation


Accumulated deficit (mm)





Per share dilution





Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Sunrun (RUN)








Institutions own


SolarCity (SCTY) SCTY and







Vivint Solar (VSLR)








Sunrun Conclusion

Neutral plus

Q1  rev +63%

Lost -106% of rev

P/E in same range as SCTY and VSLR

Price to book at a discount of VSLR

Price to sales at a discount to both

Institutions own 92% of VSLR and 49% of SCTY

Those institutions are prospects for the RUN IPO

Sunrun Business

RUN’s mission is to provide homeowners with clean, affordable solar energy and a best-in-class customer experience.

In 2007, RUN pioneered the residential solar service model, creating a hassle-free, low-cost solution for homeowners seeking to lower their energy bills.

By removing the high initial cost and complexity that used to define the residential solar industry, RUN has fostered the industry’s rapid growth and exposed an enormous market opportunity. RUN’s relentless drive to increase the accessibility of solar energy is fueled by its enduring vision: to create a planet run by the sun.

Sunrun Business Overview

RUN provides clean, solar energy to homeowners at a significant savings to traditional utility energy. After inventing the residential solar service model and recognizing its enormous market potential, RUN leveraged its first-mover advantage to build out the infrastructure and capabilities necessary to rapidly acquire and serve customers in a low-cost and scalable manner.

Today, RUN’s scalable operating platform provides it with a number of unique advantages.

First, RUN is able to drive distribution by marketing its solar service offerings through multiple channels, including its diverse partner network and direct-to-consumer operations.

This multi-channel model supports broad sales and installation capabilities, which together allow RUN to achieve capital-efficient growth.

Second, RUN is able to provide differentiated solutions to RUN’s customers that, combined with a great customer experience, RUN believes will drive meaningful margin advantages for it over the long term as RUN strives to create the industry’s most valuable and satisfied customer base.

Sunrun Core Service Offerings

RUN’s core solar service offerings are provided through its customer agreements (leases and PPAs) which provide homeowners with simple, predictable pricing for solar energy that is insulated from rising retail electricity prices.

While homeowners have the option to purchase a solar energy system outright from RUN, most of its customers choose to buy solar as a service from it through RUN’s solar service offerings and enjoy the flexibility and savings that come from purchasing solar energy without the significant upfront investment of purchasing a solar energy system.

With its solar service offerings, RUN installs solar energy systems on its customers’ homes and sell them the solar power produced by those systems for a 20-year initial term.

Most of RUN’s customers can expect to save an estimated 20% or more on their cost of electricity over that 20-year term.

In addition, RUN monitors, maintains and insures the system at no additional cost during the term of the contract.

In exchange, RUN receives 20 years of predictable cash flows from high credit quality customers and qualify for tax and other benefits. RUN finances portions of these tax benefits and cash flows through tax equity and non-recourse debt structures in order to fund its upfront costs, overhead and growth investments.

RUN develops valuable customer relationships that can extend beyond this initial contract term and provide it an opportunity to offer additional services in the future.

Sunrun Intellectual Property

As of March 31, 2015, RUN had nine issued patents and 23 filed patent applications in the United States and foreign countries relating to a variety of aspects of its solar solutions. RUN’s issued United States patents will expire 20 years from their respective filing dates, with the earliest expiring in 2029. RUN intends to file additional patent applications as RUN innovates through its research and development efforts.

Sunrun Competition

RUN believes that its primary competitors are the traditional utilities that supply electricity to its potential customers.

RUN competes with these traditional utilities primarily based on price (cents per kilowatt hour), predictability of future prices (by providing pre-determined annual price escalations) and the ease by which homeowners can switch to electricity generated by RUN’s solar energy systems. RUN believes that it competes favorably with traditional utilities based on these factors in the states where RUN offers its solar services.

RUN also competes with companies that are not regulated like traditional utilities but that have access to the traditional utility electricity transmission and distribution infrastructure pursuant to state and local pro-competitive and consumer choice policies and with solar companies with business models that are similar to ours.

RUN believes that it competes favorably with these companies based on its unique multi-channel approach and differentiated customer experience.

RUN also faces competition from purely finance-driven organizations that acquire homeowners and then subcontract out the installation of solar energy systems, from installation businesses that seek financing from external parties, from large construction companies and utilities and from sophisticated electrical and roofing companies.

At the same time, RUN’s open platform provides opportunities for these competitors to become its partners, and RUN believes its open platform offers these new market participants a cost effective way to enter the market and compelling process, technology and supply chain services over the long term.

Sunrun 5% Shareholders Pre-IPO

Jameson McJunkin        7.5%

Steve Vassallo 19.6%

Richard Wong   13.2%

Entities affiliated with Foundation Capital  19.6%

Entities affiliated with Accel Partners      13.2%

Entities affiliated with Canyon Partners   9.1%

Entities affiliated with Sequoia Capital    9.0%

Madrone Partners, L.P. 7.5%

Sunrun Dividends

No dividends are planned.

Sunrun Use of Proceeds

RUN expects to receive $222 million from its IPO and use it for the following:

for general corporate purposes, including working capital, operating expenses and capital expenditures. RUN cannot specify with certainty the particular uses of the net proceeds to RUN from this offering. Accordingly, RUN will have broad discretion in using these proceeds, provided that RUN complies with the terms and conditions contained in its credit agreements. Pending the use of proceeds to RUN from this offering as described above, RUN intends to invest the net proceeds from this offering in short-term and long-term interest-bearing obligations, including government and investment-grade debt securities and money market funds.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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