Should You Buy This Chamath Palihapitiya-Backed Solar Company?

Sunlight Financial is set to go public through a merger with blank-check company Spartan Acquisition Corp II (NYSE:SPRQ), and notable SPAC investor Chamath Palihapitiya is providing some of the private investment in public equity (PIPE) funding. But is this solar financing company’s growth opportunity compelling enough to make it worth a look for investors? In this Fool Live video clip, recorded on March 15, contributors Matt Frankel, CFP, Brian Withers, and Dan Caplinger discuss Sunlight Financial’s business and whether it is worth a closer look.

Brian Withers: Sunlight Financial. So similar deal. It’s still under the SPRQ ticker. But I’m going to talk about the Sunlight Financial business. They partner with solar panel installation and home improvement contractors nationwide to offer innovative, affordable loans. So they haven’t proprietary software platform — software — and partnerships with 800 installers. It is capital light and acts as the marketplace that matches consumers loan partners, kind of like a mortgage broker. It’s facilitated about $1.5 billion in loans in 2020, through 1000 solar installers and home improvement contractors. So some of the tailwinds I see is solar costs are declining, home inventories at 20-year loans and demand for larger contract or managed home improvement projects, including solar, is growing. So the benefits for the contractors are guaranteed quick payment. The benefits for the homeowner obviously, is kind of a one-stop shop to work with your contractor and get a loan. You can do an easy buy now, pay later to get your home improvements. 2020 revenue is estimated at $69 million with $12 million in net income. So they’re highly profitable. They’re projected to grow 80% year-over-year next year. It competes, it’s got some pretty healthy competition, Sunrun, SunPower, Tesla, and banks, don’t know these asset-like tech platforms a good investment from here, but maybe it’s a buyout candidate for a large multinational bank wanting to upgrade their front-end loan demand-generation platform. What do you guys think?

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Matt Frankel: It doesn’t seem like Dan wants to jump in too much on this one, but I like this one. I like the business. I don’t know how scalable it is my biggest obstacle to a niche financing company like this. I don’t know if this is as big of an opportunity as some of the other ones. Like you said, they have a ton of big name competition. I’m not sure I see the big competitive advantage here. Dan, what do you think about solar financing.

Dan Caplinger: I just think the vertically integrated folks like the SunPowers and the Teslas and the Sunruns. I just don’t think that, sure, there are some independent solar contractors out there and this is going to be really helpful for them. But I feel like when I look around in neighborhoods that I’m near that have a lot of solar projects going on. I see those big names. They have big-name credibility. It’s the sort of thing that it’s a niche. But I worry, too, about the growth potential.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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