Why Brookfield Renewable Corporation Tumbled More Than 17% in February

What happened

Shares of Brookfield Renewable Corporation (NYSE:BEPC) slumped 17.5% in February, according to data provided by S&P Global Market Intelligence. The renewable energy stock experienced a deeper decline than its sibling Brookfield Renewable Partners (NYSE:BEP), which slipped only 6.8% last month. 

So what

Brookfield Renewable Corporation has been a hot commodity since Brookfield Renewable Partners formed that entity last year to appeal to a broader investor base: 

BEPC data by YCharts.

As that chart shows, Brookfield Renewable Corporation’s shares have significantly outperformed units of Brookfield Renewable Partners since the spin-off. That divergence came even though they’re economically equivalent entities. The main factor powering the outperformance was investor preference. Demand was higher for the corporate entity than the partnership because it’s easier to own it in a tax-advantaged account like an IRA

That led their parent, Brookfield Asset Management (NYSE:BAM), to cash in on some of its Brookfield Renewable Corporation shares by completing a secondary offering last month. It sold 15 million shares at $51.50 apiece to provide the market with more liquidity. The offering weighed on the price of the corporate shares. 

Brookfield Renewable also reported its fourth-quarter results last month. The company posted double-digit increases in power generated and cash flow thanks in part to recent acquisitions. It also boosted its dividend by 5% and continued to secure new growth opportunities.

Now what

Brookfield Renewable created a corporate entity to broaden its investor appeal, which worked so well that the new entity trades at a premium to the partnership. The price difference narrowed last month as their parent sold some shares to increase their public availability. That won’t have any long-term impact on the underlying business, which continues to hum along as it captures opportunities to create value in the renewable energy megatrend.

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.

View more information: https://www.fool.com/investing/2021/03/08/why-brookfield-renewable-corporation-tumbled-more/

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