Lower IPO price clouds Sunnova’s first trading day

Sunnova Energy, a Houston solar energy company, made its debut on the New York Stock Exchange on Thursday after it significantly reduced the target price for its shares.

Sunnova’s stock opened at $12, a downgrade from the $16 to $18 value the company estimated when it filed its initial public offering. Sunnova’s stock fell in the first day of trading, closing at $11.25 a share.

Sunnova, which trades under the ticker symbol NOVA, initially sought to raise $319 million from the stock offering. It amended its IPO on Wednesday, estimating it would offer 17 million shares at $12.50 a share to raise $202 million. On Thursday morning, Sunnova cut the offering to 14 million shares at $12, raising about $170 million.

John Berger, the Sunnova CEO, said the company dropped the ask price because investors are nervous about investing in renewable energy companies because there are few examples of companies that have succeeded in the space. He said the first IPO filing, was a “full” ask, in that it was a best-case outcome. He said the company isn’t disappointed by the lower

share price because it was seeking long-term shareholders, who are more conservative.

“We’re reasonably pleased with the outcome,” Berger said. “I wanted shareholders for the long term, not just to flip the stock, and that’s where the shareholders I wanted coalesced.”

Berger pinned the somewhat less-than-encouraging trading day on investor nerves — he said investors do not understand how big the market potential for solar is. He added he wasn’t worried about the first day of trading.

“That’s where the market wanted to settle today, and it’s just one day,” Berger said. “We’re talking about re-doing the entire energy industry. We have a lot of work to do to get people to truly understand how exciting this space is.”

Sunnova is one of the nation’s largest solar power companies, and has leased rooftop systems to 63,000 customers in more than 20 states. It reported a net loss of $74.2 million in 2018 on revenues of $104 million, compared to a loss of $91 million in 2017.

Berger said the company plans to use the money it raises from the IPO to pay down debt — the company has more than $1 billion in long-term debt and $86 million in assets, according to Securities and Exchange Commission filings. The company also intends to expand to international markets. Berger said Sunnova will grow its Houston staff over the next few years.

“Energy has changed and Houston is changing with it,” Berger said. “I really think this is a catalyst for change and something Houston can be proud of.”

Underwriters will have a 30-day option to purchase an additional 2.1 million shares from Sunnova at the IPO price.