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Solar technology company, SunEdison Inc (SUNE - Analyst Report), has planned to raise capital by offering 30 million of its shares to the public. Deutsche Bank (DB - Analyst Report) and Goldman Sachs (GS - Analyst Report) will be the joint book running managers. These financial institutions have the option to purchase another 4.5 million of common stock from the company.

SunEdison stated that the proceeds would enable the company to invest in funding working capital requirements and other corporate purposes. Although the stake sale would dilute the company’s earnings, it would definitely help it pursue growth opportunities.

SunEdison’s shares have had an outstanding run as the stock has risen 143.8% in the last one-year period, while year-to-date the shares have increased 118.3%. So, apart from the company’s strong business fundamentals, the sheer upside potential in stock price should attract investors.

SunEdison is expected to benefit from the rise in demand for solar energy, and the spinning-off of its semiconductor business would further enable it to concentrate on its core competencies.

Though the Solar segment has not performed well in the last two quarters, we believe there is immense potential, given improving backlog and a large project pipeline. We also consider SunEdison’s recent tie-up with Brazil’s Petrobras, to build one of the largest solar photovoltaic power plants, encouraging. This venture will help SunEdison to tap the Brazilian solar market and expand geographically.

SunEdison posted a disappointing second quarter with a wider-than-expected loss. Revenues, too, failed to encourage us as it decreased almost 50% on a year-over-year basis. Solar systems sales were also lower than expected. Third-quarter guidance was cautious too. However, continuous expense control will continue to support results.

Moreover, the company mentioned that it is optimistic about gaining operating leverage from ongoing cost reduction measures. Also, it aims to reduce solar materials pricing with the help of a new sourcing strategy. Management believes that together these potential benefits would help SunEdison deliver stronger results in 2013.

Currently, SunEdison carries a Zacks Rank #3 (Hold). Investors may also consider another technology stock, Arrow Electronics (ARW - Analyst Report), which carries a Zacks Rank #1 (Strong Buy).

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