SunPower-SPWR Passes Parent Cypress-CY in Market Value

Just a month and a half after debuting on the Nasdaq, shares of SunPower Corp (Nasdaq: SPWR) have surpassed parent Cypress Semiconductor (NYSE: CY) in market value � topping $2 billion.

After pricing its IPO at $18 per share, the top end of an upwardly revised range, shares of SunPower have soared from their 11/17 debut to their current price of $34.72. Post-IPO strength in SunPower, a maker of high-efficiency silicon solar cells, is in part related to energy price jitters. Positive analyst coverage and investor enthusiasm for the alternative energy sector have also contributed to the run. Meanwhile shares of parent Cypress have lagged. Cypress was trading at $16.07 per share pre-IPO and is currently at $14.39

According to an analysis of the deal by Kevin Hare at Spin-Off Advisors, LLC, each share of Cypress has 0.3839 of a share of SunPower embedded in it. At SunPower�s close today of $34.72 per share, each share of Cypress would then have $13.32 per share just from the SunPower stake embedded in it. Based on Cypress� current market price of $14.39 this would leave the rest of Cypress worth just $1.06 per share, what Spin-Off Advisors calls the �stub�. Before the IPO, Hare calculated a stub of $9.30 per share.

The $1.06 per share value the market is placing on Cypress� remaining businesses is below the $1.66 cash per share the company has on hand and below the book value of $4.70. Traders may see a glaring arbitrage opportunity by shorting SunPower and going long Cypress, but putting on such a trade may not be in investors� best interest short-term. Joe Cornell, President of Spin-Off Advisors, LLC, cautioned that the discrepancy could remain for some time since Cypress has not indicated it would pursue a complete separation, which would give traders a more defined time table and a better assessment of risk. Cornell said some traders may be using option strategies to 'put on the trade'. He said his firm will be monitoring the stock to look for opportunities for clients.

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