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Filed Pursuant to Rule 424(b)(3)

Registration No. 333-246371

 

LOGO

  

LOGO

MERGER AND SHARE ISSUANCE PROPOSED—YOUR VOTE IS VERY IMPORTANT

Dear Sunrun and Vivint Solar Stockholders:

On July 6, 2020, Sunrun Inc., a Delaware corporation (“Sunrun”), Viking Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Sunrun (“Merger Sub”), and Vivint Solar, Inc., a Delaware corporation (“Vivint Solar”), entered into an Agreement and Plan of Merger (as it may be amended from time to time, the “merger agreement”) pursuant to which, subject to approval of Sunrun stockholders and Vivint Solar stockholders and the satisfaction or (to the extent permitted by law) waiver of other specified closing conditions, Sunrun will acquire Vivint Solar in an all-stock merger. At the completion of the merger, Merger Sub will merge with and into Vivint Solar, with Vivint Solar surviving the merger and becoming a wholly owned subsidiary of Sunrun.

If the merger is completed, each share of Vivint Solar common stock issued and outstanding immediately prior to the effective time of the merger (the “effective time”), except for certain specified shares, will be converted into the right to receive 0.55 (the “exchange ratio”) fully paid and nonassessable shares of Sunrun common stock and, if applicable, substituting cash in lieu of fractional shares, less any applicable withholding taxes (the “merger consideration”). The exchange ratio is fixed and will not be adjusted for changes in the market price of either Sunrun common stock or Vivint Solar common stock between the dates of the signing of the merger agreement and the completion of the merger. If the merger is completed, Sunrun stockholders will continue to own their existing shares of Sunrun common stock, which will not be adjusted or otherwise changed by the merger. For more details on the merger consideration, see the section entitled “The Merger Agreement—Merger Consideration” beginning on page 154 of the accompanying joint proxy statement/prospectus.

Sunrun common stock is traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “RUN”, and Vivint Solar common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “VSLR”. As of September 1, 2020, the last completed trading day before the date of the accompanying joint proxy statement/prospectus, the last reported sales price of Sunrun common stock at the end of regular trading hours, as reported on Nasdaq, was $58.27 per share, and the last reported sales price of Vivint Solar common stock at the end of regular trading hours, as reported on NYSE, was $31.90 per share. Because the merger consideration is payable in a fixed number of shares of Sunrun common stock, with each share of Vivint Solar common stock being exchanged for 0.55 shares of Sunrun common stock, the implied value of the merger consideration to be received in exchange for each share of Vivint Solar common stock will fluctuate based on the market price of Sunrun common stock until the completion of the merger. As a result, the value of the per share merger consideration that Vivint Solar stockholders will be entitled to receive upon completion of the merger could be greater than, less than or the same as the value of the merger consideration on the date of the accompanying joint proxy statement/prospectus. Accordingly, Sunrun and Vivint Solar urge you to obtain updated market quotations for Sunrun common stock before deciding whether to vote for the proposals presented in the accompanying joint proxy statement/prospectus.

Based on the number of shares of Vivint Solar common stock outstanding and reserved for issuance as of the Vivint Solar record date (as defined below), and the number of shares of Sunrun common stock outstanding and reserved for issuance as of the Sunrun record date (as defined below), we estimate that, immediately following completion of the merger, former holders of Vivint Solar common stock will own approximately 35.5% of the common stock of Sunrun on a fully diluted basis, and pre-merger holders of Sunrun common stock will own approximately 64.5% of the common stock of Sunrun on a fully diluted basis.

Each of Sunrun and Vivint Solar is holding a virtual special meeting of its stockholders to vote on the proposals necessary to complete the merger. In light of the ongoing COVID-19 pandemic, Sunrun and Vivint Solar have each chosen to hold an exclusively virtual special meeting rather than an in-person meeting to minimize the health and safety risks of holding an in-person meeting and to allow for greater access to those who may want to attend. Information about each virtual special meeting, the merger and the other business to be considered by stockholders at each virtual special meeting is contained in the accompanying joint proxy statement/prospectus. Any stockholder entitled to attend and vote at the applicable virtual special meeting is entitled to appoint a proxy to attend and vote on such stockholder’s behalf. Such proxy need not be a holder of Sunrun common stock or Vivint Solar common stock. We urge you to read the accompanying joint proxy statement/prospectus and the annexes and documents incorporated by reference carefully. You should also carefully consider the risks that are described in the section entitled “Risk Factors” beginning on page 39 of the accompanying joint proxy statement/prospectus before making any voting decisions.

Your vote is very important regardless of the number of shares of Sunrun common stock or Vivint Solar common stock that you own. The merger cannot be completed unless (1) Sunrun stockholders approve the issuance of Sunrun common stock to Vivint Solar stockholders in connection with the merger and (2) Vivint Solar stockholders adopt the merger agreement.

The Sunrun board of directors unanimously recommends that Sunrun stockholders vote “FOR” each of the proposals to be considered at the Sunrun virtual special meeting. The Vivint Solar board of directors unanimously recommends that Vivint Solar stockholders vote “FOR” each of the proposals to be considered at the Vivint Solar virtual special meeting.

Whether or not you plan to attend the Sunrun virtual special meeting or the Vivint Solar virtual special meeting, please submit your proxy as soon as possible to make sure that your shares are represented at the applicable meeting.

 

LOGO

 

Lynn Jurich

Chief Executive Officer

Sunrun Inc.

  

LOGO

 

David Bywater

Chief Executive Officer

Vivint Solar, Inc.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or the other transactions described in the accompanying joint proxy statement/prospectus or the securities to be issued in connection with the merger or determined if the accompanying joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying joint proxy statement/prospectus is dated September 2, 2020 and is first being mailed to Sunrun stockholders and Vivint Solar stockholders on or about September 2, 2020.


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LOGO

225 Bush Street, Suite 1400

San Francisco, California 94104

NOTICE OF VIRTUAL SPECIAL MEETING OF STOCKHOLDERS

To be held at 8:00 am Pacific Time on October 1, 2020

Dear Sunrun Inc. Stockholders:

Notice is hereby given that Sunrun Inc. (“Sunrun”), will hold a virtual special meeting of its stockholders (the “Sunrun virtual special meeting”), exclusively online via live audio-only webcast on October 1, 2020 at 8:00 am Pacific Time.

There will not be a physical meeting location. The Sunrun virtual special meeting can be accessed by visiting http://virtualshareholdermeeting.com/Sunrun2020SM, where you will be able to attend the Sunrun virtual special meeting via live audio-only webcast. You will be able to vote your shares and submit questions during the Sunrun virtual special meeting webcast by logging in to the website listed above using the 16-digit control number included in your proxy card. Online check-in will begin at 7:50 am Pacific Time, and we encourage you to allow ample time for the online check-in procedures. Please note that you will not be able to attend the Sunrun virtual special meeting in person. We are holding the Sunrun virtual special meeting to consider the following proposals:

 

1.

Approval of the Sunrun Share Issuance. To vote on a proposal to approve the issuance of shares of Sunrun common stock, par value $0.0001 per share, to Vivint Solar stockholders in connection with the merger contemplated by the Agreement and Plan of Merger, dated as of July 6, 2020 (as it may be amended from time to time, the “merger agreement”), by and among Sunrun, Viking Merger Sub, Inc. and Vivint Solar, Inc. (the “Sunrun share issuance proposal”); and

 

2.

Adjournment of the Sunrun Virtual Special Meeting. To vote on a proposal to approve the adjournment of the Sunrun virtual special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Sunrun virtual special meeting to approve the Sunrun share issuance proposal (the “Sunrun adjournment proposal”).

Sunrun will transact no other business at the Sunrun virtual special meeting, except such business as may properly be brought before the Sunrun virtual special meeting or any adjournment or postponement thereof. Please refer to the joint proxy statement/prospectus of which this notice is a part for further information with respect to the business to be transacted at the Sunrun virtual special meeting.

The Sunrun board of directors, referred to as the Sunrun Board, has fixed the close of business on August 31, 2020 as the record date for the Sunrun virtual special meeting, referred to as the Sunrun record date. Only Sunrun stockholders of record as of the Sunrun record date are entitled to receive notice of, and to vote at, the Sunrun virtual special meeting or any adjournment or postponement thereof.

Completion of the merger is conditioned on, among other things, approval of the Sunrun share issuance proposal by the Sunrun stockholders, which requires the affirmative vote of the holders of a majority of the voting power of the shares of Sunrun common stock, present or represented by proxy at the Sunrun virtual special meeting and entitled to vote on the Sunrun share issuance proposal.

The Sunrun Board unanimously approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement, including the merger, and determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger and the Sunrun share issuance, are advisable and fair to and in the best interests of Sunrun and its stockholders, and unanimously recommends that Sunrun stockholders vote:

 

   

“FOR” the Sunrun share issuance proposal; and

 

   

“FOR” the Sunrun adjournment proposal.

Your vote is very important regardless of the number of shares of Sunrun common stock that you own. In order to approve the Sunrun share issuance proposal, the votes cast in favor of the Sunrun share issuance proposal must represent a majority of the voting power of the shares present or represented by proxy at the meeting and entitled to vote on the proposal. Accordingly, abstentions will have the same effect as a vote against the Sunrun share issuance proposal.

You are cordially invited to attend the Sunrun virtual special meeting. The Sunrun virtual special meeting can be accessed by visiting http://virtualshareholdermeeting.com/Sunrun2020SM, where you will be able to attend the Sunrun virtual special meeting via live audio-only webcast. You will be able to vote your shares and submit questions during the Sunrun virtual special meeting webcast by logging in to the website listed above using the 16-digit control number included in your proxy card. Whether or not you expect to attend the Sunrun virtual special meeting, to ensure your representation at the Sunrun virtual special meeting, we urge you to submit a proxy to vote your shares as promptly as possible by (1) visiting the Internet site listed on the enclosed Sunrun proxy card, (2) calling the toll-free number listed on the enclosed Sunrun proxy card or (3) submitting your enclosed Sunrun proxy card by mail by using the provided self-addressed, stamped envelope. Submitting a proxy will not prevent you from attending by means of remote communication the Sunrun virtual special meeting and voting at the Sunrun virtual special meeting, but it will help to ensure that a quorum is present and avoid added solicitation costs. Any holder of record of Sunrun common stock as of the Sunrun record date who attends the Sunrun virtual special meeting may vote at the Sunrun virtual special meeting, thereby revoking any previous proxy. In addition, a proxy may also be revoked in writing before the Sunrun virtual special meeting in the manner described in the accompanying joint proxy statement/prospectus. If your shares are held in the name of a bank, broker or other nominee, please follow the instructions on the voting instruction form furnished by your bank, broker or other nominee.

If you own shares in street name through an account with a bank, broker or other nominee and you decide to attend the Sunrun virtual special meeting, you cannot vote at the Sunrun virtual special meeting unless you present a “legal proxy”, issued in your name from your bank, broker or other nominee.

The accompanying joint proxy statement/prospectus provides a detailed description of the merger and the merger agreement and the other matters to be considered at the Sunrun virtual special meeting. We urge you to carefully read this joint proxy statement/prospectus, including any documents incorporated by reference herein, and the annexes in their entirety. If you have any questions concerning either of the proposals in this notice, the merger or the accompanying joint proxy statement/prospectus, would like additional copies or need help voting your shares of Sunrun common stock, please contact Sunrun’s proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway – 27th Floor

New York, New York 10018

Stockholders may call toll-free: (800) 322-2885

Banks and Brokers may call collect: (212) 929-5500

Email: proxy@mackenziepartners.com

By Order of the Board of Directors,

 

LOGO

 

Jeanna Steele

General Counsel and Corporate Secretary

 

September 2, 2020


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LOGO

VIVINT SOLAR, INC.

1800 West Ashton Boulevard

Lehi, Utah 84043

NOTICE OF VIRTUAL SPECIAL MEETING OF STOCKHOLDERS

To be held at 9:00 am Mountain Time on October 1, 2020

Dear Stockholders of Vivint Solar, Inc.:

Notice is hereby given that Vivint Solar, Inc. (“Vivint Solar”), will hold a virtual special meeting of its stockholders (the “Vivint Solar virtual special meeting”) exclusively online via live audio-only webcast on October 1, 2020 at 9:00 am Mountain Time.

There will not be a physical meeting location. The Vivint Solar virtual special meeting can be accessed by visiting https://www.vivintsolar.com/2020specialmeeting, where you will be able to attend the virtual meeting live, have an opportunity to submit questions, and vote online. We encourage you to allow ample time for online check-in, which will open at 8:50 am, Mountain Time. Please note that you will not be able to attend the Vivint Solar virtual special meeting in person. We are holding the Vivint Solar virtual special meeting to consider the following proposals:

 

  1.

Adoption of the Merger Agreement. To vote on a proposal to adopt the merger agreement, which is further described in the accompanying joint proxy statement/prospectus, including in the section entitled “The Merger Agreement” beginning on page 154 of the accompanying joint proxy statement/prospectus, and a copy of the merger agreement is attached as Annex A to the accompanying joint proxy statement/prospectus (the “Vivint Solar merger proposal”);

 

  2.

Vivint Solar Merger-Related Compensation. To vote on a proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by Vivint Solar to certain of its named executive officers that is based on or otherwise relates to the merger contemplated by the merger agreement (the “Vivint Solar merger-related compensation proposal”); and

 

  3.

Adjournment of the Vivint Solar Virtual Special Meeting. To vote on a proposal to approve the adjournment of the Vivint Solar virtual special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Vivint Solar virtual special meeting to approve the Vivint Solar merger proposal (the “Vivint Solar adjournment proposal”).

Vivint Solar will transact no other business at the Vivint Solar virtual special meeting, except such business as may properly be brought before the Vivint Solar virtual special meeting or any adjournment or postponement thereof. Please refer to the joint proxy statement/prospectus of which this notice is a part for further information with respect to the business to be transacted at the Vivint Solar virtual special meeting.

The Vivint Solar board of directors, referred to as the Vivint Solar Board, has fixed the close of business on August 31, 2020 as the record date for the Vivint Solar virtual special meeting, referred to as the Vivint Solar record date. Only Vivint Solar stockholders of record as of the Vivint Solar record date are entitled to receive notice of, and to vote at, the Vivint Solar virtual special meeting or any adjournment or postponement thereof.

Completion of the merger is conditioned on, among other things, approval of the Vivint Solar merger proposal by the Vivint Solar stockholders, which requires the affirmative vote of the holders a majority of all the shares of Vivint Solar common stock outstanding as of the close of business on the Vivint Solar record date and entitled to vote on the Vivint Solar merger proposal.

The Vivint Solar Board unanimously approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement, including the merger, and determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable, fair to and in the best interests of Vivint Solar and its stockholders, and unanimously recommends that Vivint Solar stockholders vote:

“FOR” the Vivint Solar merger proposal;

“FOR” the Vivint Solar merger-related compensation proposal; and

“FOR” the Vivint Solar adjournment proposal.

Your vote is very important regardless of the number of shares of Vivint Solar common stock that you own. In order to approve the Vivint Solar merger proposal, the votes cast in favor of the Vivint Solar merger proposal must represent a majority of the shares of Vivint Solar common stock outstanding as of the close of business on the Vivint Solar record date. Accordingly, abstentions will have the same effect as a vote against the Vivint Solar merger proposal.

You are cordially invited to attend the Vivint Solar virtual special meeting. The Vivint Solar virtual special meeting can be accessed by visiting https://www.vivintsolar.com/2020specialmeeting, where you will be able to listen to the Vivint Solar virtual special meeting live, have an opportunity to submit questions and vote online. Whether or not you expect to attend the Vivint Solar virtual special meeting, to ensure your representation at the Vivint Solar virtual special meeting, we urge you to submit a proxy to vote your shares as promptly as possible by (1) visiting the Internet site listed on the enclosed Vivint Solar proxy card, (2) calling the toll-free number listed on the enclosed Vivint Solar proxy card or (3) submitting your enclosed Vivint Solar proxy card by mail by using the provided self-addressed, stamped envelope. Submitting a proxy will not prevent you from attending by means of remote communication the Vivint Solar virtual special meeting and voting at the Vivint Solar virtual special meeting, but it will help to ensure that a quorum is present and avoid added solicitation costs. Any holder of record of Vivint Solar common stock as of the Vivint Solar record date who attends the Vivint Solar virtual special meeting may vote at the Vivint Solar virtual special meeting, thereby revoking any previous proxy. In addition, a proxy may also be revoked in writing before the Vivint Solar virtual special meeting in the manner described in the accompanying joint proxy statement/prospectus. If your shares are held in the name of a bank, broker or other nominee, please follow the instructions on the voting instruction form furnished by your bank, broker or other nominee.

If you own shares in street name through an account with a bank, broker or other nominee and you decide to attend the Vivint Solar virtual special meeting, you cannot vote at the Vivint Solar virtual special meeting unless you present a “legal proxy”, issued in your name from your bank, broker or other nominee.

The accompanying joint proxy statement/prospectus provides a detailed description of the merger and the merger agreement and the other matters to be considered at the Vivint Solar virtual special meeting. We urge you to carefully read this joint proxy statement/prospectus, including any documents incorporated by reference herein, and the annexes in their entirety. If you have any questions concerning either of the proposals in this notice, the merger or the accompanying joint proxy statement/prospectus, would like additional copies or need help voting your shares of Vivint Solar common stock, please contact Vivint Solar’s proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders may call toll-free: (877) 800-5187

Banks and Brokers may call collect: (212) 750-5833

By Order of the Board of Directors,

 

LOGO

 

C. Dan Black

Chief Legal Officer, Executive Vice President, and Secretary

 

September 2, 2020


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ADDITIONAL INFORMATION

The accompanying joint proxy statement/prospectus incorporates by reference important business and financial information about Sunrun and Vivint Solar from other documents that are not included in or delivered with the accompanying joint proxy statement/prospectus. For a listing of the documents incorporated by reference into the accompanying joint proxy statement/prospectus, see the section entitled “Where You Can Find More Information” beginning on page 217 of the accompanying joint proxy statement/prospectus.

You can obtain any of the documents incorporated by reference into the joint proxy statement/prospectus by requesting them in writing or by telephone as follows:

 

For Sunrun Stockholders:
Sunrun Inc.
225 Bush Street, Suite 1400

San Francisco, California 94104
Attention: Investor Relations
(415) 373-5206

investors@sunrun.com

  

For Vivint Solar Stockholders:
Vivint Solar, Inc.
1800 West Ashton Boulevard
Lehi, Utah 84043
Attention: Investor Relations
(855) 842-1844

ir@vivintsolar.com

To receive timely delivery of the documents in advance of the Sunrun virtual special meeting and the Vivint Solar virtual special meeting, you should make your request no later than September 24, 2020.

You may also obtain any of the documents incorporated by reference into the accompanying joint proxy statement/prospectus without charge through the Securities and Exchange Commission (the “SEC”) website at www.sec.gov. In addition, you may obtain copies of documents filed by Sunrun with the SEC on Sunrun’s Internet website at https://investors.sunrun.com/, under the tab “Filings & Financials”, then under the tab “SEC Filings” or by contacting Sunrun’s Corporate Secretary at Sunrun Inc., 225 Bush Street, Suite 1400, San Francisco, California 94104 or by calling (415) 580-6900. You may also obtain copies of documents filed by Vivint Solar with the SEC on Vivint Solar’s Internet website at https://investors.vivintsolar.com/, under the tab “Financial Information”, then under the tab “SEC Filings” or by contacting Vivint Solar’s Secretary at Vivint Solar, Inc., 1800 West Ashton Boulevard, Lehi, Utah 84043 or by calling (877) 404-4129.

We are not incorporating the contents of the websites of the SEC, Sunrun, Vivint Solar or any other entity or any other website into the accompanying joint proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into the accompanying joint proxy statement/prospectus at these websites only for your convenience.


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ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the SEC by Sunrun (File No. 333-246371), constitutes a prospectus of Sunrun under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of common stock, par value $0.0001 per share, of Sunrun to be issued to Vivint Solar stockholders pursuant to the merger agreement. This document also constitutes a joint proxy statement of each of Sunrun and Vivint Solar under Section 14(a) of the Securities Exchange Act of 1934, as amended. It also constitutes a notice of meeting with respect to the Sunrun virtual special meeting, at which Sunrun stockholders will be asked to consider and vote upon the Sunrun share issuance proposal and certain other proposals, and constitutes a notice of meeting with respect to the Vivint Solar virtual special meeting, at which Vivint Solar stockholders will be asked to consider and vote upon the Vivint Solar merger proposal and certain other proposals.

Sunrun has supplied all information contained or incorporated by reference into this joint proxy statement/prospectus relating to Sunrun and Viking Merger Sub, Inc. and Vivint Solar has supplied all information contained or incorporated by reference into this joint proxy statement/prospectus relating to Vivint Solar.

You should rely only on the information contained in or incorporated by reference into this joint proxy statement/prospectus. Sunrun and Vivint Solar have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference into this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated as of the date set forth above on the cover page of this joint proxy statement/prospectus, and you should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than such date. Further, you should not assume that the information incorporated by reference into this joint proxy statement/prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing of this joint proxy statement/prospectus to Sunrun stockholders or Vivint Solar stockholders nor the issuance by Sunrun of shares of Sunrun common stock pursuant to the merger agreement will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

 


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS

     1  

SUMMARY

     12  

The Parties to the Merger

     12  

The Merger and the Merger Agreement

     13  

Merger Consideration; Exchange Ratio

     13  

Treatment of Vivint Solar Equity Awards

     13  

Recommendation of the Sunrun Board and its Reasons for the Merger

     15  

Recommendation of the Vivint Solar Board and its Reasons for the Merger

     15  

Opinion of Sunrun’s Financial Advisor

     15  

Opinions of Vivint Solar’s Financial Advisors

     16  

Interests of Sunrun’s Directors and Executive Officers in the Merger

     17  

Interests of Vivint Solar’s Directors and Executive Officers in the Merger

     17  

Information about the Sunrun Virtual Special Meeting

     18  

Information about the Vivint Solar Virtual Special Meeting

     19  

Voting by Sunrun Directors and Executive Officers

     20  

Voting by Vivint Solar Directors and Executive Officers

     21  

Governance of Sunrun

     21  

Regulatory Approvals

     21  

Litigation Relating to the Merger

     22  

Conditions to the Merger

     22  

Expected Timing of the Merger

     23  

Ownership of Sunrun after the Merger

     23  

No Solicitation; Change of Recommendation

     23  

Termination of the Merger Agreement

     24  

Termination Fee

     25  

No Appraisal Rights

     26  

The Ancillary Agreements

     26  

Material U.S. Federal Income Tax Consequences of the Merger

     27  

Accounting Treatment

     28  

Rights of Vivint Solar Stockholders Will Change as a Result of the Merger

     28  

Listing of Sunrun Common Stock and Delisting and Deregistration of Vivint Solar Common Stock

     28  

Risk Factors

     28  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SUNRUN

     29  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF VIVINT SOLAR

     32  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     34  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     35  

COMPARATIVE PER SHARE MARKET PRICE INFORMATION AND IMPLIED VALUE OF MERGER CONSIDERATION

     36  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     37  

RISK FACTORS

     39  

Risks Relating to the Merger

     39  

Risks Relating to Sunrun Upon Completion of the Merger

     48  

Other Risks Relating to Sunrun and Vivint Solar

     52  

 

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(continued)

 

     Page  

THE SUNRUN VIRTUAL SPECIAL MEETING

     53  

Date, Time and Place of the Virtual Special Meeting

     53  

Matters to be Considered

     53  

Recommendation of the Sunrun Board

     53  

Sunrun Record Date; Sunrun Stockholders Entitled to Vote

     53  

Voting by Sunrun’s Directors and Executive Officers

     54  

Quorum

     55  

Required Vote

     55  

Voting by Holders of Record

     55  

Voting via Proxies Submitted by the Internet or by Telephone

     55  

Voting via Proxies Submitted by Mail

     55  

Treatment of Abstentions; Failure to Vote

     56  

Shares Held in Street Name / Broker Non-Votes

     56  

Attendance at the Sunrun Virtual Special Meeting and Voting at the Sunrun Virtual Special Meeting

     56  

Revocability of Proxies

     57  

Solicitation of Proxies; Expenses of Solicitation

     57  

Tabulation of Votes

     58  

Adjournments

     58  

Assistance and Additional Information

     58  

SUNRUN PROPOSALS

     59  

Sunrun Proposal 1: Approval of the Sunrun Share Issuance

     59  

Sunrun Proposal 2: Adjournment of the Sunrun Virtual Special Meeting

     59  

THE VIVINT SOLAR VIRTUAL SPECIAL MEETING

     60  

Date, Time and Place of the Virtual Special Meeting

     60  

Matters to be Considered

     60  

Recommendation of the Vivint Solar Board

     60  

Vivint Solar Record Date; Vivint Solar Stockholders Entitled to Vote

     61  

Voting by Vivint Solar’s Directors and Executive Officers

     61  

Quorum

     62  

Required Vote

     62  

Voting by Holders of Record

     63  

Voting via Proxies Submitted by the Internet or by Telephone

     63  

Voting via Proxies Submitted by Mail

     63  

Treatment of Abstentions; Failure to Vote

     63  

Shares Held in Street Name / Broker Non-Votes

     64  

Attendance at the Vivint Solar Virtual Special Meeting

     64  

Revocability of Proxies

     65  

Solicitation of Proxies; Expenses of Solicitation

     65  

Tabulation of Votes

     65  

Adjournments

     66  

Assistance and Additional Information

     66  

VIVINT SOLAR PROPOSALS

     67  

Vivint Solar Proposal 1: Adoption of the Merger Agreement

     67  

Vivint Solar Proposal 2: Vivint Solar Merger-Related Compensation

     67  

Vivint Solar Proposal 3: Adjournment of the Vivint Solar virtual special meeting

     68  

 

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     Page  

THE PARTIES TO THE MERGER

     69  

Sunrun Inc.

     69  

Vivint Solar, Inc.

     69  

Viking Merger Sub, Inc.

     69  

THE MERGER

     70  

Effect of the Merger

     70  

Merger Consideration

     70  

Background of the Merger

     71  

Reasons for the Merger

     89  

Opinion of Sunrun’s Financial Advisor

     98  

Opinions of Vivint Solar’s Financial Advisors

     106  

Certain Sunrun Unaudited Prospective Financial Information

     126  

Certain Vivint Solar Unaudited Prospective Financial Information

     131  

Certain Estimated Synergies

     136  

Interests of Sunrun’s Directors and Executive Officers in the Merger

     137  

Interests of Vivint Solar’s Directors and Executive Officers in the Merger

     137  

Governance of Sunrun

     147  

Regulatory Approvals

     147  

Litigation Relating to the Merger

     148  

Timing of the Transaction

     149  

No Appraisal or Dissenters’ Rights in the Merger

     149  

The Ancillary Agreements

     149  

Accounting Treatment

     152  

Listing of Sunrun Common Stock

     152  

Delisting and Deregistration of Vivint Solar Common Stock

     152  

Restrictions on Sales of Sunrun Common Stock Received in the Merger

     153  

THE MERGER AGREEMENT

     154  

Explanatory Note Regarding the Merger Agreement

     154  

Structure of the Merger

     154  

Merger Consideration

     154  

Treatment of Vivint Solar Equity Awards

     155  

Closing and Effectiveness of the Merger

     157  

Conversion of Shares; Exchange of Certificates; Fractional Shares

     157  

Governance of Sunrun

     158  

Representations and Warranties; Material Adverse Effect

     158  

Covenants and Agreements

     161  

Conditions to the Merger

     173  

Termination

     174  

Expenses and Termination Fees

     175  

Amendment and Waiver

     177  

Third-Party Beneficiaries

     177  

Governing Law; Waiver of Jury Trial

     177  

Specific Performance

     178  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     179  

 

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TABLE OF CONTENTS

(continued)

 

     Page  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     182  

Unaudited Pro Forma Condensed Combined Balance Sheet

     184  

Unaudited Pro Forma Condensed Combined Statement of Operations

     185  

Unaudited Pro Forma Condensed Combined Statement of Operations

     186  

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     187  

DESCRIPTION OF CAPITAL STOCK OF SUNRUN AFTER THE MERGER

     194  

COMPARATIVE RIGHTS OF STOCKHOLDERS

     196  

LEGAL MATTERS

     211  

EXPERTS

     212  

DEADLINES FOR SUBMITTING SUNRUN STOCKHOLDER PROPOSALS

     213  

DEADLINES FOR SUBMITTING VIVINT SOLAR STOCKHOLDER PROPOSALS

     215  

HOUSEHOLDING OF PROXY MATERIALS

     216  

WHERE YOU CAN FIND MORE INFORMATION

     217  

ANNEXES TO JOINT PROXY STATEMENT/PROSPECTUS

  

Annex A: Agreement and Plan of Merger

     A-1  

Annex B: Opinion of Credit Suisse Securities (USA) LLC

     B-1  

Annex C: Opinion of Morgan Stanley & Co. LLC

     C-1  

Annex D: Opinion of BofA Securities, Inc.

     D-1  

 

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QUESTIONS AND ANSWERS

The following questions and answers briefly address some commonly asked questions about the merger, the merger agreement, the transactions contemplated by the merger agreement, the Sunrun virtual special meeting and the Vivint Solar virtual special meeting. They may not include all the information that is important to Sunrun stockholders and Vivint Solar stockholders. Sunrun stockholders and Vivint Solar stockholders should carefully read this entire joint proxy statement/prospectus, including the annexes and the other documents referred to or incorporated by reference herein.

 

Q:

What is the merger?

 

A:

Sunrun, Merger Sub and Vivint Solar have entered into a merger agreement. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. The merger agreement contains the terms and conditions of the proposed merger involving Sunrun and Vivint Solar, whereby Sunrun will acquire Vivint Solar in an all-stock merger. Under the merger agreement, subject to satisfaction or (to the extent permitted by law) waiver of the conditions set forth in the merger agreement and described hereafter, in each case prior to the completion of the merger, Merger Sub will merge with and into Vivint Solar, with Vivint Solar surviving the merger and becoming a wholly owned subsidiary of Sunrun (the “merger”). As a result of the merger, shares of Vivint Solar will no longer be publicly traded and will be delisted from the New York Stock Exchange, referred to as NYSE, and will be deregistered under the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act.

 

Q:

Why am I receiving these materials?

 

A:

You are receiving this joint proxy statement/prospectus to help you decide how to vote your shares of Sunrun common stock or Vivint Solar common stock with respect to the Sunrun share issuance proposal or the Vivint Solar merger proposal, respectively, and other matters to be considered at the virtual special meetings.

The merger cannot be completed unless, among other things, (1) Sunrun stockholders approve the issuance of Sunrun common stock to Vivint Solar stockholders in connection with the merger at the Sunrun virtual special meeting and (2) Vivint Solar stockholders adopt the merger agreement at the Vivint Solar virtual special meeting.

This joint proxy statement/prospectus constitutes both a joint proxy statement of Sunrun and Vivint Solar and a prospectus of Sunrun. It is a joint proxy statement because each of the Sunrun board of directors (the “Sunrun Board”) and the Vivint Solar board of directors (the “Vivint Solar Board”) is soliciting proxies from its stockholders. It is a prospectus because Sunrun will issue shares of its common stock in exchange for outstanding shares of Vivint Solar common stock in the merger if the merger is consummated. Information about the Sunrun virtual special meeting, the Vivint Solar virtual special meeting, the merger, the merger agreement and the other business to be considered by Sunrun stockholders at the Sunrun virtual special meeting and Vivint Solar stockholders at the Vivint Solar virtual special meeting is contained in this joint proxy statement/prospectus. Sunrun stockholders and Vivint Solar stockholders should read this information carefully and in its entirety. The enclosed voting materials allow Sunrun stockholders and Vivint Solar stockholders to vote their shares by proxy without attending the applicable virtual special meeting.

 

Q:

What will Vivint Solar stockholders receive in the merger?

 

A:

If the merger is completed, each share of Vivint Solar common stock issued and outstanding immediately prior to the effective time, except for certain specified shares, will be converted into the right to receive the merger consideration, which is the right to receive 0.55 fully paid and nonassessable shares of Sunrun common stock, and, if applicable, cash in lieu of fractional shares, less any applicable withholding taxes. The merger consideration is described in more detail in the section entitled “The Merger Agreement—Merger Consideration” beginning on page 154 of this joint proxy statement/prospectus.

 

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Q:

What will Sunrun stockholders receive in the merger?

 

A:

Sunrun stockholders will not receive any merger consideration, and their shares of Sunrun common stock will remain outstanding.

 

Q:

What respective equity stakes will Sunrun stockholders and Vivint Solar stockholders hold in Sunrun immediately following the merger?

 

A:

Based on the number of shares of Sunrun common stock and Vivint Solar common stock outstanding and reserved for issuance as of the Sunrun record date and the Vivint Solar record date, respectively, we estimate that, immediately following completion of the merger, pre-merger holders of Sunrun common stock will own approximately 64.5% of the common stock of Sunrun on a fully diluted basis and former holders of Vivint Solar common stock will own approximately 35.5% of the common stock of Sunrun on a fully diluted basis. The exact equity stake of Sunrun stockholders and Vivint Solar stockholders in Sunrun immediately following the merger will depend on the number of shares of Sunrun common stock and Vivint Solar common stock issued and outstanding immediately prior to the merger.

 

Q:

Will the market value of the merger consideration change between the date of this joint proxy statement/prospectus and the time the merger is completed?

 

A:

Yes. Although the number of shares of Sunrun common stock that holders of Vivint Solar common stock will receive is fixed, the market value of the merger consideration will fluctuate between the date of this joint proxy statement/prospectus and the completion of the merger based upon the trading price of shares of Sunrun common stock. Any fluctuation in the trading price of shares of Sunrun common stock after the date of this joint proxy statement/prospectus will change the market value of the shares of Sunrun common stock that holders of Vivint Solar common stock will receive.

 

Q:

When do Sunrun and Vivint Solar expect to complete the transaction?

 

A:

Sunrun and Vivint Solar are working to complete the transaction as soon as practicable. We currently expect that the merger will be completed in the fourth quarter of 2020. Neither Sunrun nor Vivint Solar can predict, however, the actual date on which the merger will be completed because it is subject to conditions beyond each company’s control, including obtaining the necessary regulatory approvals.

See the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 173 of this joint proxy statement/prospectus.

 

Q:

What matters will be considered at each of the virtual special meetings?

 

A:

Sunrun stockholders are being asked to vote on the following proposals:

 

  1.

Approval of the Sunrun Share Issuance. To vote on a proposal to approve the issuance of Sunrun common stock, par value $0.0001 per share, to Vivint Solar stockholders in connection with the merger agreement, referred to as the Sunrun share issuance proposal; and

 

  2.

Adjournment of the Sunrun Virtual Special Meeting. To vote on a proposal to approve the adjournment of the Sunrun virtual special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Sunrun virtual special meeting to approve the Sunrun share issuance proposal, referred to as the Sunrun adjournment proposal.

Vivint Solar stockholders are being asked to vote on the following proposals:

 

  1.

Adoption of the Merger Agreement. To vote on a proposal to adopt the merger agreement, which is further described in the section entitled “The Merger Agreement”, beginning on page 154 of this joint

 

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  proxy statement/prospectus and a copy of which merger agreement is attached as Annex A to this joint proxy statement/prospectus, referred to as the Vivint Solar merger proposal;

 

  2.

Vivint Solar Merger-Related Compensation. To vote on a proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by Vivint Solar to certain of its named executive officers that is based on or otherwise relates to the merger contemplated by the merger agreement, referred to as the Vivint Solar merger-related compensation proposal; and

 

  3.

Adjournment of the Vivint Solar Virtual Special Meeting. To vote on a proposal to approve the adjournment of the Vivint Solar virtual special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Vivint Solar virtual special meeting to approve the Vivint Solar merger proposal, referred to as the Vivint Solar adjournment proposal.

Approval of the Sunrun share issuance proposal by Sunrun stockholders and approval of the Vivint Solar merger proposal by Vivint Solar stockholders are required for completion of the merger.

 

Q:

What vote is required to approve each proposal at the Sunrun virtual special meeting?

 

A:

The Sunrun share issuance proposal: The affirmative vote of the holders of a majority of the voting power of the shares of Sunrun common stock, present or represented by proxy at the Sunrun virtual special meeting and entitled to vote on the Sunrun share issuance proposal is required to approve the Sunrun share issuance proposal.

Sunrun adjournment proposal: The affirmative vote of the holders of a majority of the voting power of the shares of Sunrun common stock, present or represented by proxy at the Sunrun virtual special meeting and entitled to vote on the Sunrun adjournment proposal is required to approve the Sunrun adjournment proposal.

 

Q:

What vote is required to approve each proposal at the Vivint Solar virtual special meeting?

 

A:

The Vivint Solar merger proposal: The affirmative vote of the holders of a majority of the shares of Vivint Solar common stock outstanding as of the close of business on the Vivint Solar record date and entitled to vote on the Vivint Solar merger proposal is required to approve the Vivint Solar merger proposal.

The Vivint Solar merger-related compensation proposal: The affirmative vote of the holders of a majority of the voting power of the shares of Vivint Solar common stock, present or represented by proxy at the Vivint Solar virtual special meeting and entitled to vote on the Vivint Solar merger-related compensation proposal, is required to approve the Vivint Solar merger-related compensation proposal.

The Vivint Solar adjournment proposal: The affirmative vote of the holders of a majority of the voting power of the shares of Vivint Solar common stock, present or represented by proxy at the Vivint Solar virtual special meeting and entitled to vote on the Vivint Solar adjournment proposal, is required to approve the Vivint Solar adjournment proposal.

 

Q:

Why are Vivint Solar stockholders being asked to consider and vote on a proposal to approve, on a non-binding, advisory basis, the Vivint Solar merger-related executive compensation?

 

A:

Under SEC rules, Vivint Solar is required to seek a vote on a non-binding, advisory basis with respect to the compensation that may be paid or become payable to its named executive officers that is based on, or otherwise relates to, the merger.

 

Q:

What happens if the Vivint Solar merger-related compensation proposal is not approved?

 

A:

Approval of the Vivint Solar merger-related compensation proposal is not a condition to completion of the merger, and because the vote on the Vivint Solar merger-related compensation proposal is advisory only, it

 

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  will not be binding on Vivint Solar. Accordingly, if the merger is approved and the other conditions to closing are satisfied or waived, the merger will be completed even if the Vivint Solar merger-related compensation proposal is not approved. If the Vivint Solar merger proposal is approved and the Sunrun share issuance proposal is approved and the merger is completed, the Vivint Solar merger-related compensation will be payable to Vivint Solar’s named executive officers, subject only to the conditions applicable thereto, regardless of the outcome of the vote on the Vivint Solar merger-related compensation proposal.

 

Q:

Do any of Sunrun’s or Vivint Solar’s directors or executive officers have interests in the merger that may differ from those of Sunrun stockholders or Vivint Solar stockholders?

 

A:

Certain of Sunrun’s directors and executive officers and Vivint Solar’s directors and executive officers have certain interests in the merger that may be different from, or in addition to, the interests of Sunrun stockholders and Vivint Solar stockholders generally. The Sunrun Board was aware of the interests of Sunrun’s directors and executive officers, the Vivint Solar Board was aware of the interests of Vivint Solar’s directors and executive officers, and each board carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation, of the merger, in approving the merger agreement and the transactions contemplated thereby, including the merger, and in making its recommendations to its stockholders. For more information regarding these interests, see the sections entitled “The Merger—Interests of Sunrun’s Directors and Executive Officers in the Merger” and “The Merger—Interests of Vivint Solar’s Directors and Executive Officers in the Merger” beginning on page 137 of this joint proxy statement/prospectus.

 

Q:

How many votes do I have?

Each Sunrun stockholder is entitled to one vote for each share of Sunrun common stock held of record as of the Sunrun record date and each Vivint Solar stockholder is entitled to one vote for each share of Vivint Solar common stock held of record as of the Vivint Solar record date.

As of the close of business on the Sunrun record date, there were 126,894,221 shares of Sunrun common stock outstanding. As of the close of business on the Vivint Solar record date, there were 125,866,872 shares of Vivint Solar common stock outstanding. As summarized below, there are some important distinctions between shares held of record and those owned beneficially in street name.

 

Q:

What constitutes a quorum for the Sunrun virtual special meeting?

 

A:

The presence at the Sunrun virtual special meeting, virtually or represented by proxy, of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote thereat, as of the Sunrun record date, will constitute a quorum for the transaction of business at the Sunrun virtual special meeting. Abstentions (which are described below) will count for the purpose of determining the presence of a quorum for the transaction of business at the Sunrun virtual special meeting.

 

Q:

What constitutes a quorum for the Vivint Solar virtual special meeting?

 

A:

The presence at the Vivint Solar virtual special meeting, virtually or represented by proxy, of the holders of a majority of the voting power of the stock issued, outstanding and entitled to vote thereat, as of the Vivint Solar record date, will constitute a quorum for the transaction of business at the Vivint Solar virtual special meeting. Abstentions (which are described below) will count for the purpose of determining the presence of a quorum for the transaction of business at the Vivint Solar virtual special meeting.

 

Q:

How does the Sunrun Board recommend that Sunrun stockholders vote?

 

A:

The Sunrun Board unanimously recommends that Sunrun stockholders vote: “FOR” the Sunrun share issuance proposal and “FOR” the Sunrun adjournment proposal.

 

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Q:

How does the Vivint Solar Board recommend that Vivint Solar stockholders vote?

 

A:

The Vivint Solar Board unanimously recommends that Vivint Solar stockholders vote: “FOR” the Vivint Solar merger proposal, “FOR” the Vivint Solar merger-related compensation proposal and “FOR” the Vivint Solar adjournment proposal.

 

Q:

Why did the Sunrun Board approve the merger agreement and the transactions contemplated by the merger agreement, including the merger?

 

A:

For information regarding the Sunrun Board’s reasons for approving the merger agreement and the transactions contemplated by the merger agreement, including the merger, and recommending that Sunrun stockholders approve the Sunrun share issuance proposal, see the section entitled “The Merger—Reasons for the Merger—Sunrun Board’s Recommendation and Reasons for the Merger” beginning on page 89 of this joint proxy statement/prospectus.

 

Q:

Why did the Vivint Solar Board approve the merger agreement and the transactions contemplated by the merger agreement, including the merger?

 

A:

For information regarding the Vivint Solar Board’s reasons for approving and recommending adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger, see the section entitled “The Merger—Reasons for the Merger—Vivint Solar Board’s Recommendation and Reasons for the Merger” beginning on page 94 of this joint proxy statement/prospectus.

 

Q:

What if I hold shares in both Sunrun and Vivint Solar?

 

A:

If you hold shares of both Sunrun common stock and Vivint Solar common stock, you will receive two separate packages of proxy materials. A vote cast as a holder of Sunrun common stock will not count as a vote cast as a holder of Vivint Solar common stock, and a vote cast as a holder of Vivint Solar common stock will not count as a vote cast as a holder of Sunrun common stock. Therefore, please submit separate proxies for your shares of Sunrun common stock and your shares of Vivint Solar common stock.

 

Q:

What do I need to do now?

 

A:

After carefully reading and considering the information contained in this joint proxy statement/prospectus, please vote your shares as soon as possible so that your shares will be represented at the Sunrun virtual special meeting or Vivint Solar virtual special meeting, as applicable. Please follow the instructions set forth on the enclosed Sunrun proxy card or the Vivint Solar proxy card, as applicable, or on the voting instruction form provided by the record holder of your shares if your shares are held in the name of your bank, broker or other nominee.

 

Q:

Does my vote matter?

 

A:

Yes. The merger cannot be completed unless the Sunrun share issuance proposal is approved by the affirmative vote of the holders of a majority of the voting power of the shares of Sunrun common stock, present or represented by proxy at the Sunrun virtual special meeting and entitled to vote on the Sunrun share issuance proposal and the Vivint Solar merger proposal is approved by the affirmative vote of the holders of a majority of the shares of Vivint Solar common stock outstanding as of the close of business on the Vivint Solar record date and entitled to vote on the Vivint Solar merger proposal.

 

Q:

How do I vote?

 

A:

If you are a stockholder of record of Sunrun as of the Sunrun record date, you are entitled to receive notice of, and cast a vote at, the Sunrun virtual special meeting. If you are a stockholder of record of Vivint Solar as of the Vivint Solar record date, you are entitled to receive notice of, and cast a vote at, the Vivint Solar virtual special meeting. Each holder of Sunrun common stock is entitled to cast one vote on each matter properly brought before the Sunrun virtual special meeting for each share of Sunrun common stock that

 

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  such holder owned of record as of the Sunrun record date. Each holder of Vivint Solar common stock is entitled to cast one vote on each matter properly brought before the Vivint Solar virtual special meeting for each share of Vivint Solar common stock that such holder owned of record as of the Vivint Solar record date. You may submit your proxy to vote your shares before the Sunrun virtual special meeting or the Vivint Solar virtual special meeting in one of the following ways:

 

   

Telephone—use the toll-free number shown on your proxy card;

 

   

Via the Internet—visit the website shown on your proxy card to vote via the Internet; or

 

   

Mail—complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

If you are a stockholder of record, you may also cast your vote at the applicable virtual special meeting.

If your shares are held in “street name”, through a bank, broker or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. “Street name” stockholders who wish to vote at the Sunrun virtual special meeting or the Vivint Solar virtual special meeting will need to obtain a “legal proxy” form from their bank, broker or other nominee.

 

Q:

What is the difference between holding shares as stockholder of record and as a beneficial owner?

 

A:

You are a “stockholder of record” if your shares are registered in your name with Sunrun’s transfer agent, American Stock Transfer & Trust Co LLC, referred to as AST, or Vivint Solar’s transfer agent, Computershare Trust Company, N.A., referred to as Computershare. As the stockholder of record, you have the right to vote at the Sunrun virtual special meeting or the Vivint Solar virtual special meeting, as applicable. You may also vote by submitting a proxy via the Internet, telephone or mail, as described in the notice and above under the heading “How do I vote?” You are deemed to beneficially own shares in “street name” if your shares are held by a bank, broker or other nominee. Your bank, broker or other nominee will send you, as the beneficial owner, a package describing the procedure for voting your shares. You should follow the instructions provided by them to vote your shares. If you beneficially own your shares, you are invited to attend the Sunrun virtual special meeting or Vivint Solar virtual special meeting, as applicable; however, you may not vote your shares at the Sunrun virtual special meeting or the Vivint Solar virtual special meeting, as applicable, unless you obtain a “legal proxy” from your bank, broker or other nominee that holds your shares, giving you the right to vote the shares at the Sunrun virtual special meeting or the Vivint Solar virtual special meeting, as applicable.

 

Q:

If my shares are held in “street name” by a bank, broker or other nominee, will my bank, broker or other nominee vote my shares for me?

 

A:

If your shares are held in “street name” by a bank, broker or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your bank, broker or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to Sunrun or Vivint Solar, as applicable, or by voting at the Sunrun virtual special meeting or Vivint Solar virtual special meeting, as applicable, unless you provide a “legal proxy”, which you must obtain from your bank, broker or other nominee. Your bank, broker or other nominee is obligated to provide you with a voting instruction form for you to use.

Banks, brokers or other nominees who hold shares in street name for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers or other nominees are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non-routine” without specific instructions from the beneficial owner. It is expected that all proposals to be voted on at each of the Sunrun virtual special meeting and the Vivint Solar virtual special meeting are “non-routine” matters. Broker non-votes occur when a broker or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the bank, broker or other nominee does not have discretionary voting power. If a beneficial owner of shares of Sunrun common stock or Vivint Solar common stock held in street

 

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name does not give voting instructions to the broker, bank or other nominee, then those shares will not be present or represented by proxy at the Sunrun virtual special meeting or the Vivint Solar virtual special meeting. As a result, there will not be any broker non-votes at the Sunrun virtual special meeting or the Vivint Solar virtual special meeting.

 

Q:

May I attend the Sunrun virtual special meeting or the Vivint Solar virtual special meeting?

 

A:

You or your authorized proxy may attend the Sunrun virtual special meeting if you were a registered or beneficial stockholder of Sunrun common stock as of the Sunrun record date.

You or your authorized proxy may attend the Vivint Solar virtual special meeting if you were a registered or beneficial stockholder of Vivint Solar common stock as of the Vivint Solar record date.

 

Q:

When and where will the Sunrun virtual special meeting take place? What must I do to attend the Sunrun virtual special meeting?

 

A:

The Sunrun virtual special meeting will be held exclusively online via live audio-only webcast on October 1, 2020 at 8:00 am Pacific Time. Online check-in will begin at 7:50 am Pacific Time, and we encourage you to allow ample time for the online check-in procedures. Please note that you will not be able to attend the Sunrun virtual special meeting in person.

You or your authorized proxy may attend the Sunrun virtual special meeting if you were a registered or beneficial stockholder of Sunrun common stock as of the Sunrun record date.

You will be able to vote your shares and submit questions during the Sunrun virtual special meeting webcast by logging in to the website listed above using the 16-digit control number included in your proxy card. If you wish to submit a question during the Sunrun virtual special meeting, log into the Sunrun virtual special meeting platform at http://virtualshareholdermeeting.com/Sunrun2020SM, type your question into the “Ask a Question” field, and click “Submit.” We will respond to as many properly submitted questions during the relevant portion of the Sunrun virtual special meeting agenda as time allows.

If we experience technical difficulties during the Sunrun virtual special meeting (e.g., a temporary or prolonged power outage), we will determine whether the Sunrun virtual special meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the Sunrun virtual special meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, we will promptly notify stockholders of the decision via http://virtualshareholdermeeting.com/Sunrun2020SM. We will have technicians ready to assist you with any technical difficulties you may have accessing the Sunrun virtual special meeting website. If you encounter any difficulties accessing the Sunrun virtual special meeting website during the check-in or meeting time, please call the technical support number that will be posted on the Sunrun virtual special meeting website log-in page at http://virtualshareholdermeeting.com/Sunrun2020SM.

You should register in advance to attend the Sunrun virtual special meeting. To do so, please make your request by mail to Office of the Corporate Secretary, 225 Bush Street, Suite 1400, San Francisco, California 94104, email at legalnotices@sunrun.com or by phone at (415) 580-6900. You are encouraged to timely make any such request such that Sunrun’s Corporate Secretary receives your request for an admission ticket on or before September 24, 2020.

If you own shares in street name through an account with a bank, broker or other nominee, please send proof of your Sunrun share ownership as of the Sunrun record date (for example, a brokerage firm account statement or a “legal proxy” from your intermediary) along with your registration request. If you are not sure what proof to send, check with your intermediary.

If your shares are registered in your name with Sunrun’s stock registrar and transfer agent, American Stock Transfer & Trust Company, no proof of ownership is necessary because Sunrun can verify your ownership.

 

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Q:

When and where will the Vivint Solar virtual special meeting take place? What must I do to attend the Vivint Solar virtual special meeting?

 

A:

The Vivint Solar virtual special meeting will be held exclusively online via live audio-only webcast on October 1, 2020 at 9:00 am Mountain Time. We encourage you to allow ample time for online check-in, which will open at 8:50 am, Mountain Time. Please note that you will not be able to attend the special meeting in person.

You or your authorized proxy may attend the Vivint Solar virtual special meeting if you were a registered or beneficial stockholder of Vivint Solar common stock as of the Vivint Solar record date.

To participate in the Vivint Solar virtual special meeting, visit https://www.vivintsolar.com/2020specialmeeting and enter the 15-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. The password for the meeting is VSLR2020. If you wish to submit a question during the Vivint Solar virtual special meeting, log into the virtual meeting platform at https://www.vivintsolar.com/2020specialmeeting, click the message icon at the top of the screen, and submit your question. We will respond to as many properly submitted questions during the relevant portion of the Vivint Solar virtual special meeting agenda as time allows.

If we experience technical difficulties during the Vivint Solar virtual special meeting (e.g., a temporary or prolonged power outage), we will determine whether the Vivint Solar virtual special meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the Vivint Solar virtual special meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, we will promptly notify stockholders of the decision via https://www.vivintsolar.com/2020specialmeeting.

If you are a registered stockholder (that is, you hold your shares through Vivint Solar’s transfer agent, Computershare), you do not need to register to attend the Vivint Solar virtual special meeting virtually on the Internet. Please follow the instructions on the notice or proxy card that you received. No proof of ownership is necessary because Vivint Solar can verify your ownership.

If you hold your shares through an intermediary, such as a bank or broker, you must register in advance to attend the Vivint Solar virtual special meeting virtually on the Internet. To register to attend the Vivint Solar virtual special meeting online by webcast, you must submit proof of your proxy power (legal proxy) reflecting your Vivint Solar holdings, along with your name and email address, to Computershare by email to legalproxy@computershare.com or mail to Computershare, Vivint Solar, Inc. Legal Proxy, P.O. Box 43001, Providence, RI 02940-3001. Requests for registration must be labeled as “Legal Proxy” and be received no later than 11:59 pm, Eastern Time, on September 24, 2020.

 

Q:

What if I fail to vote or abstain?

 

A:

For purposes of the Sunrun virtual special meeting, an abstention occurs when a Sunrun stockholder attends the Sunrun virtual special meeting and does not vote or returns a proxy with an “abstain” instruction.

Sunrun share issuance proposal: An abstention will have the same effect as a vote cast “AGAINST” the Sunrun share issuance proposal. If a Sunrun stockholder is not present at the Sunrun virtual special meeting and does not respond by proxy, it will have no effect on the vote count for such proposal.

Sunrun adjournment proposal: An abstention will have the same effect as a vote cast “AGAINST” the Sunrun adjournment proposal. If a Sunrun stockholder is not present at the Sunrun virtual special meeting and does not respond by proxy, it will have no effect on the vote count for such proposal.

For purposes of the Vivint Solar virtual special meeting, an abstention occurs when a Vivint Solar stockholder attends the Vivint Solar virtual special meeting and does not vote or returns a proxy with an “abstain” instruction.

Vivint Solar merger proposal: An abstention will have the same effect as a vote cast “AGAINST” the Vivint Solar merger proposal. If a Vivint Solar stockholder is not present at the Vivint Solar virtual special

 

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meeting and does not respond by proxy, it will have the same effect of a vote cast “AGAINST” such proposal.

Vivint Solar merger-related compensation proposal: An abstention will have the same effect as a vote cast “AGAINST” the Vivint Solar merger-related compensation proposal. If a Vivint Solar stockholder is not present at the Vivint Solar virtual special meeting and does not respond by proxy, it will have no effect on the outcome of the Vivint Solar merger-related compensation proposal (assuming a quorum is present).

Vivint Solar adjournment proposal: An abstention will have the same effect as a vote cast “AGAINST” the Vivint Solar adjournment proposal. If a Vivint Solar stockholder is not present at the Vivint Solar virtual special meeting and does not respond by proxy, it will have no effect on the vote count for such proposal.

 

Q:

What will happen if I return my proxy or voting instruction form without indicating how to vote?

 

A:

If you submit your proxy or voting instruction form without indicating how to vote your shares on any particular proposal, the common stock represented by your proxy will be voted as recommended by the Sunrun Board or the Vivint Solar Board, as applicable, with respect to that proposal.

 

Q:

May I change or revoke my vote after I have delivered my proxy or voting instruction form?

 

A:

Yes. If you are a record holder, you may change or revoke your vote before your proxy is voted at the Sunrun virtual special meeting or the Vivint Solar virtual special meeting, as applicable, as described herein. You may do this in one of the following four ways:

 

   

By delivering to Sunrun’s Corporate Secretary (at Sunrun’s executive offices at 225 Bush Street, Suite 1400, San Francisco, California 94104) or Vivint Solar’s Secretary (at Vivint Solar’s principal executive offices located at 1800 West Ashton Boulevard, Lehi, Utah 84043), as applicable, a signed written notice of revocation bearing a later date than the proxy, stating that the proxy is revoked, which revocation is received prior to the proxy’s exercise at the applicable virtual special meeting;

 

   

By duly executing a subsequently dated proxy relating to the same shares of Sunrun common stock or Vivint Solar common stock and returning it in the postage-paid envelope provided, which subsequent proxy is received before the prior proxy is exercised at the applicable virtual special meeting;

 

   

By duly submitting a subsequently dated proxy relating to the same shares of Sunrun common stock or Vivint Solar common stock by telephone or via the Internet (i.e., your most recent duly submitted voting instructions will be followed) before 11:59 pm Eastern Time on September 30, 2020; or

 

   

By attending the Sunrun virtual special meeting or the Vivint Solar virtual special meeting and voting such shares during the Sunrun virtual special meeting or the Vivint Solar virtual special meeting.

If your shares are held in an account at a bank, broker or other nominee and you have delivered your voting instruction form or otherwise given instruction on how to vote your shares to your bank, broker or other nominee or your applicable plan administrator, you should contact your bank, broker or other nominee or your applicable plan administrator to change your vote.

 

Q:

What are the material U.S. federal income tax consequences of the merger?

 

A:

The obligations of the parties to complete the merger are conditioned on, among other things, the receipt by each of Sunrun and Vivint Solar of an opinion from its respective outside counsel (or other nationally recognized law firm, including outside counsel to the other party), each dated and based on the facts and law existing as of the closing date of the merger and relying upon customary assumptions and certain representations made by Sunrun and Vivint Solar, that for U.S. federal income tax purposes the merger will qualify as a ‘‘reorganization’’ within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, referred to as “the Code”. Accordingly, it is expected that U.S. holders (as defined in the

 

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  section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 179 of this joint proxy statement/prospectus) of shares of Vivint Solar common stock generally will not recognize any gain or loss for U.S. federal income tax purposes upon receipt of Sunrun common stock in exchange for Vivint Solar common stock in the merger (other than gain or loss, if any, with respect to any cash received in lieu of a fractional share of Sunrun common stock). For more information regarding the material U.S. federal income tax consequences of the merger, see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 179 of this joint proxy statement/prospectus.

 

Q:

Where can I find the voting results of the Sunrun virtual special meeting and the Vivint Solar virtual special meeting?

 

A:

The preliminary voting results will be announced at each of the Sunrun virtual special meeting and the Vivint Solar virtual special meeting. In addition, within four business days following certification of the final voting results, each of Sunrun and Vivint Solar intends to file the final voting results with the SEC on a Current Report on Form 8-K.

 

Q:

Are holders of Sunrun common stock entitled to appraisal rights?

 

A:

No. Holders of Sunrun common stock are not entitled to appraisal rights under the Delaware General Corporation Law of the State of Delaware, as amended, referred to as the DGCL. For more information, see the section entitled “The Merger—No Appraisal or Dissenters’ Rights in the Merger” beginning on page 149 of this joint proxy statement/prospectus.

 

Q:

Are holders of Vivint Solar common stock entitled to appraisal rights?

 

A:

No. Holders of Vivint Solar common stock are not entitled to appraisal rights under the DGCL. For more information, see the section entitled “The Merger—No Appraisal or Dissenters’ Rights in the Merger” beginning on page 149 of this joint proxy statement/prospectus.

 

Q:

What happens if I sell my shares of Sunrun common stock after the Sunrun record date but before the Sunrun virtual special meeting?

 

A:

The Sunrun record date for the Sunrun virtual special meeting (the close of business on August 31, 2020) is earlier than the date of the Sunrun virtual special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of Sunrun common stock after the Sunrun record date but before the date of the Sunrun virtual special meeting, you will retain your right to vote at the Sunrun virtual special meeting.

 

Q:

What happens if I sell my shares of Vivint Solar common stock after the Vivint Solar record date but before the Vivint Solar virtual special meeting?

 

A:

The Vivint Solar record date for the Vivint Solar virtual special meeting (the close of business on August 31, 2020) is earlier than the date of the Vivint Solar virtual special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of Vivint Solar common stock after the Vivint Solar record date but before the date of the Vivint Solar virtual special meeting, you will retain your right to vote at the Vivint Solar virtual special meeting. However, you will not have the right to receive the merger consideration to be received by Vivint Solar stockholders in the merger. In order to receive the merger consideration, you must hold your shares through completion of the merger.

 

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Q:

Are there any risks that I should consider in deciding whether to vote in favor of the Sunrun share issuance proposal or the Vivint Solar merger proposal, or the other proposals to be considered at the Sunrun virtual special meeting or the Vivint Solar virtual special meeting, as applicable?

 

A:

Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 39 of this joint proxy statement/prospectus. You also should read and carefully consider the risk factors of Sunrun and Vivint Solar contained in the documents that are incorporated by reference into this joint proxy statement/prospectus.

 

Q:

What are the conditions to completion of the merger?

 

A:

In addition to the approval of the Sunrun share issuance proposal by Sunrun stockholders and of the Vivint Solar merger proposal by Vivint Solar stockholders as described above, completion of the merger is subject to the satisfaction or (to the extent permitted by law) waiver of a number of other conditions, including:

 

   

the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, referred to as the HSR Act;

 

   

the effectiveness of the registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part;

 

   

approval of the listing on the Nasdaq Global Select Market (“Nasdaq”) of the Sunrun common stock forming part of the merger consideration;

 

   

the absence of any order or law that has the effect of enjoining or otherwise making illegal the consummation of the merger;

 

   

receipt by each of Sunrun and Vivint Solar of an opinion of its respective outside counsel (or other nationally recognized law firm, including outside counsel to the other party) to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code;

 

   

the absence of a material adverse effect with respect to Sunrun or Vivint Solar, as applicable, since the date of the merger agreement;

 

   

the accuracy of the representations and warranties of Sunrun or Vivint Solar, as applicable, made in the merger agreement (subject to the materiality standards set forth in the merger agreement);

 

   

the performance by Sunrun or Vivint Solar in all material respects, as applicable, of its covenants and obligations under the merger agreement; and

 

   

delivery of an officer’s certificate by each of Sunrun and Vivint Solar certifying satisfaction of the conditions described in the preceding three bullet points.

 

Q:

Whom should I contact if I have any questions about the proxy materials or voting?

 

A:

If you are a stockholder of record of Sunrun and you have any questions about the proxy materials, or if you need assistance submitting your proxy or voting your shares or need additional copies of this joint proxy statement/prospectus or the enclosed Sunrun proxy card, you should contact MacKenzie Partners, Inc., referred to as MacKenzie, the proxy solicitation agent for Sunrun, at (800) 322-2885 (toll-free for stockholders) or (212) 929-5500 (collect for banks and brokers).

If you are a stockholder of record of Vivint Solar and you have any questions about the proxy materials, or if you need assistance submitting your proxy or voting your shares or need additional copies of this joint proxy statement/prospectus or the enclosed Vivint Solar proxy card, you should contact Innisfree M&A Incorporated, referred to as Innisfree, the proxy solicitation agent for Vivint Solar, at (877) 800-5187 (toll-free for stockholders) or (212) 750-5833 (collect for banks and brokers).

 

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SUMMARY

This summary highlights selected information contained in this joint proxy statement/prospectus and does not contain all the information that may be important to you. Sunrun and Vivint Solar urge you to read carefully this joint proxy statement/prospectus in its entirety, including the annexes. Additional, important information, which Sunrun and Vivint Solar also urge you to read, is contained in the documents incorporated by reference into this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus.

The Parties to the Merger (page 69)

Sunrun Inc.

Sunrun is one of the nation’s leading home solar, battery storage, and energy services companies. Sunrun’s mission is to provide our customers with clean, affordable solar energy and storage, and a best-in-class customer experience. Founded in 2007, Sunrun pioneered the residential solar service model, creating a low-cost solution for customers seeking to lower their energy bills. By removing the high initial cost and complexity of cash system sales that used to define the residential solar industry, Sunrun fostered the residential solar industry’s rapid growth and generated enormous consumer value. Sunrun’s innovative home battery solution, Brightbox, brings families affordable, resilient, and reliable energy. The company can also manage and share stored solar energy from the batteries to provide benefits to households, utilities, and the electric grid while reducing our reliance on polluting energy sources. Sunrun’s relentless drive to increase the accessibility and affordability of solar energy is fueled by Sunrun’s enduring vision: to create a planet run by the sun. Sunrun’s principal executive offices are located at 225 Bush Street, Suite 1400, San Francisco, California 94104, and its telephone number is (415) 580-6900.

Sunrun’s common stock is publicly traded on Nasdaq under the ticker symbol “RUN”.

Vivint Solar, Inc.

Vivint Solar is a leading full-service residential solar provider in the United States. Founded in 2011, Vivint Solar provides homeowners with simple and affordable clean energy. With the help of Vivint Solar, homeowners can power their homes with clean, renewable energy, typically achieving significant financial savings over time. Vivint Solar designs and installs solar energy systems for homeowners and offers monitoring and maintenance services. In addition to being able to purchase a solar energy system outright, homeowners may benefit from Vivint Solar’s affordable, flexible financing options, including power purchase agreements, or lease agreements, where available. Vivint Solar also offers solar plus storage systems with LG Chem home batteries and electric vehicle chargers with ChargePoint Home. Vivint Solar’s principal executive offices are located at 1800 West Ashton Boulevard, Lehi, Utah 84043 and its telephone number is (877) 404-4129.

Vivint Solar’s common stock is publicly traded on NYSE under the ticker symbol “VSLR”.

Viking Merger Sub, Inc.

Viking Merger Sub, Inc., referred to as Merger Sub, a direct wholly owned subsidiary of Sunrun, is a Delaware corporation incorporated on July 2, 2020 for the purpose of effecting the merger. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. The principal executive offices of Merger Sub are located at 225 Bush Street, Suite 1400, San Francisco, California 94104, and its telephone number is (415) 580-6900.



 

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The Merger and the Merger Agreement (page 70)

The terms and conditions of the merger are contained in the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus. We encourage you to read the merger agreement carefully and in its entirety, as it is the primary legal document that governs the merger.

Subject to the terms and conditions of the merger agreement and in accordance with the DGCL, Merger Sub will be merged with and into Vivint Solar, with Vivint Solar continuing as the surviving corporation and a wholly owned subsidiary of Sunrun. Following the merger, Vivint Solar common stock will be delisted from NYSE, deregistered under the Exchange Act and will cease to be publicly traded.

Merger Consideration; Exchange Ratio (page 154)

At the completion of the merger, each share of Vivint Solar common stock that is issued and outstanding immediately prior to the effective time, except for the excluded shares, will be converted into the right to receive 0.55 shares of Sunrun common stock, and, if applicable, cash in lieu of fractional shares, less any applicable withholding taxes. The exchange ratio is fixed, which means that it will not change between now and the date of the merger, regardless of whether the market price of either Sunrun common stock or Vivint Solar common stock changes. The market value of Sunrun common stock at the time of completion of the merger could be greater than, less than or the same as the market value of Sunrun common stock on the date of this joint proxy statement/prospectus. We urge you to obtain current market quotations for the shares of common stock of Sunrun and Vivint Solar.

For more details on the exchange ratio, see the section entitled “The Merger Agreement—Merger Consideration” beginning on page 154 of this joint proxy statement/prospectus.

Treatment of Vivint Solar Equity Awards (page 155)

Vivint Solar Stock Options

Immediately prior to completion of the merger, except as described in the following paragraph, each then-outstanding Vivint Solar stock option (whether vested or unvested) will automatically be converted into an option to purchase (1) that number of shares of Sunrun common stock equal to the product (with the result rounded down to the nearest whole share) of (a) the number of shares of Vivint Solar common stock subject to such Vivint Solar stock option immediately prior to completion of the merger and (b) the exchange ratio, (2) at an exercise price per share of Sunrun common stock equal to the quotient (with the result rounded up to the nearest whole cent) of (a) the exercise price per share of Vivint Solar common stock of such Vivint Solar stock option immediately prior to completion of the merger and (b) the exchange ratio. Except as otherwise provided in the foregoing sentence, each Vivint Solar stock option that is converted into a Sunrun stock option will remain subject to the same terms and conditions as applied to such Vivint Solar stock option as of immediately prior to the completion of the merger.

Each Vivint Solar stock option that is outstanding immediately prior to completion of the merger and that is held by a non-employee director of Vivint Solar or a current or former employee of Vivint Solar who will not be employed by Sunrun following completion of the merger, referred to as a non-employee, will be canceled upon completion of the merger and converted into the right to receive an amount in cash equal to (1) the total number of shares of Vivint Solar common stock subject to such Vivint Solar stock option immediately prior to completion of the merger multiplied by (2) the excess, if any, of (a) the per share cash equivalent of the merger consideration (determined by multiplying the merger consideration by the dollar volume-weighted average price, rounded to four decimal points, of Sunrun common stock for the ten consecutive trading days prior to the date that is two business days prior to the closing of the merger), referred to as the per share cash equivalent, over



 

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(b) the exercise price per share of Vivint Solar common stock under such Vivint Solar stock option, less applicable taxes required to be withheld with respect to such payment. Any Vivint Solar stock option held by a non-employee which has an exercise price per share of Vivint Solar common stock that is greater than or equal to the per share cash equivalent will be canceled upon completion of the merger for no consideration or payment.

Vivint Solar RSU Awards

Immediately prior to completion of the merger, except as described in the following paragraph, each then-outstanding Vivint Solar restricted stock unit (a “Vivint Solar RSU”) will automatically be converted into a restricted stock unit denominated in shares of Sunrun common stock (a “Sunrun RSU”). The number of shares of Sunrun common stock subject to each such Sunrun RSU will be equal to the product (with the result rounded down to the nearest whole share) of (1) the number of shares of Vivint Solar common stock subject to the corresponding Vivint Solar RSU as of immediately prior to completion of the merger multiplied by (2) the exchange ratio. Except as otherwise provided in the foregoing sentence, each Sunrun RSU so converted from a Vivint Solar RSU will remain subject to the same terms and conditions as applied to the corresponding Vivint Solar RSU as of immediately prior to the completion of the merger.

Each Vivint Solar RSU that is outstanding immediately prior to completion of the merger and held by a non-employee director of Vivint Solar will be canceled upon completion of the merger, and converted into the right to receive an amount in cash equal to (1) the total number of shares of Vivint Solar common stock subject to such Vivint Solar RSU immediately prior to completion of the merger multiplied by (2) the per share cash equivalent, less applicable taxes required to be withheld with respect to such payment.

Vivint Solar PSU Awards

Immediately prior to completion of the merger, each then-outstanding Vivint Solar performance-based restricted stock unit (a “Vivint Solar PSU”) will automatically be converted into a performance-based restricted stock unit denominated in shares of Sunrun common stock (a “Sunrun PSU”). The number of shares of Sunrun common stock subject to each such Sunrun PSU will be equal to the product (with the result rounded down to the nearest whole share) of (1) the number of shares of Vivint Solar common stock subject to the corresponding Vivint Solar PSU as of immediately prior to completion of the merger multiplied by (2) the exchange ratio. Except as otherwise provided in the foregoing sentence, each Sunrun PSU so converted from a Vivint Solar PSU will remain subject to the same terms and conditions as applied to the corresponding Vivint Solar PSU as of immediately prior to the completion of the merger.

Vivint Solar LTIP Awards

Immediately prior to completion of the merger, each then-outstanding award (a “Vivint Solar LTIP Award”) made pursuant to Vivint Solar’s Amended and Restated 2013 Long Term Incentive Pool Plans (the “Vivint Solar LTIP Plans”) will be canceled and terminated. As soon as practicable following the completion of the merger and Sunrun’s filing of a Form S-8 registration statement registering the remaining share reserves of the Vivint Solar, Inc. 2014 Equity Incentive Plan (the “2014 Plan”), each holder of a canceled Vivint Solar LTIP Award will be granted an award of restricted stock units under the 2014 Plan (a “Replacement RSU Award”) with the following terms: (1) the number of shares of Sunrun common stock subject to the Replacement RSU Award will have a grant date fair market value equal to the value of each holder’s Vivint Solar LTIP Award, calculated as if the closing date of the merger were a determination date under the Vivint Solar LTIP Plans upon which certain performance conditions under the Vivint Solar LTIP Plans were attained, with such number of shares of Sunrun common stock rounded down to the nearest whole share; (2) the Replacement RSU Award will vest, and the shares of Sunrun common stock will be issued, in three equal installments, subject to the grantee’s continued provision of services to Sunrun or Vivint Solar through each of 30 days, nine months and 18 months following



 

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the closing date of the merger; and (3) the Replacement RSU Award will be subject to the same restrictive covenants as the Vivint Solar LTIP Awards (other than adjustments necessary to reflect that the Replacement RSU Award will be granted under the 2014 Plan, rather than the Vivint Solar LTIP Plans).

For additional information please see the section entitled “The Merger Agreement—Treatment of Vivint Solar Equity Awards” beginning on page 155 of this joint proxy statement/prospectus.

Sunrun Board’s Recommendation and Reasons for the Merger (page 89)

After careful consideration of various factors described in the section entitled “The Merger—Reasons for the Merger—Sunrun Board’s Recommendation and Reasons for the Merger”, beginning on page 89 of this joint proxy statement/prospectus, the Sunrun Board unanimously determined that the merger agreement and the transactions contemplated by the merger agreement (including the merger and the Sunrun share issuance) are advisable and fair to and in the best interests of Sunrun and its stockholders, and the Sunrun Board unanimously recommends that holders of Sunrun common stock vote:

 

   

“FOR” the Sunrun share issuance proposal; and

 

   

“FOR” the Sunrun adjournment proposal.

Vivint Solar Board’s Recommendation and Reasons for the Merger (page 94)

After careful consideration of various factors described in the section entitled “The Merger—Reasons for the Merger—Vivint Solar Board’s Recommendation and Reasons for the Merger”, beginning on page 94 of this joint proxy statement/prospectus, the Vivint Solar Board unanimously determined that the merger agreement and the transactions contemplated by the merger agreement (including the merger) are advisable and fair to and in the best interests of Vivint Solar and its stockholders, and the Vivint Solar Board unanimously recommends that holders of Vivint Solar common stock vote:

 

   

“FOR” the Vivint Solar merger proposal;

 

   

“FOR” the Vivint Solar merger-related compensation proposal; and

 

   

“FOR” the Vivint Solar adjournment proposal.

Opinion of Sunrun’s Financial Advisor (page 98)

Sunrun retained Credit Suisse Securities (USA) LLC, referred to as “Credit Suisse”, to act as financial advisor to the Sunrun Board in connection with the proposed merger involving Sunrun and Vivint Solar. On July 6, 2020, Credit Suisse rendered its oral opinion to the Sunrun Board (which was subsequently confirmed by delivery of Credit Suisse’s written opinion dated as of the same date) to the effect that, as of July 6, 2020, and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse and referred to in such opinion, the exchange ratio set forth in the merger agreement was fair, from a financial point of view, to Sunrun.

Credit Suisse’s opinion was directed to the Sunrun Board, and only addressed the fairness, from a financial point of view, to Sunrun of the exchange ratio set forth in the merger agreement and did not address any other aspect or implication of the merger. The summary of Credit Suisse’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, a copy of which is attached as Annex B to this joint proxy statement/prospectus and incorporated herein by reference. You are encouraged to read the entire opinion—which sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters



 

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considered by Credit Suisse in connection with the preparation of its opinion—carefully and in its entirety. However, neither Credit Suisse’s opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus is intended to be, and they do not constitute, advice or a recommendation to any holders of shares of Sunrun common stock or holders of shares of Vivint Solar common stock as to how such holder should vote or act with respect to any matter relating to the transaction. For more information, see the section entitled “The Merger—Opinion of Sunrun’s Financial Advisor” beginning on page 98 of this joint proxy statement/prospectus, as well as Annex B to this joint proxy statement/prospectus.

Opinions of Vivint Solar’s Financial Advisors (page 106)

Opinion of Morgan Stanley & Co. LLC

Vivint Solar retained Morgan Stanley & Co. LLC, referred to as “Morgan Stanley”, to act as one of its financial advisors to the Vivint Solar Board in connection with the proposed merger involving Vivint Solar and Sunrun. At the meeting of the Vivint Solar Board on July 6, 2020, Morgan Stanley rendered an oral opinion, which was subsequently confirmed by delivery of a written opinion dated July 6, 2020, that as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in its written opinion, the exchange ratio was fair from a financial point of view to the holders of shares of Vivint Solar common stock (other than the excluded shares). The full text of the written opinion of Morgan Stanley, dated as of July 6, 2020, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this joint proxy statement/prospectus as Annex C and is incorporated herein by reference. The summary of the opinion of Morgan Stanley in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion.

You are encouraged to read the entire opinion carefully and in its entirety.

Morgan Stanley’s opinion was rendered for the benefit of the Vivint Solar Board, in its capacity as such, and addressed only the fairness from a financial point of view of the exchange ratio to the holders of shares of Vivint Solar common stock (other than the excluded shares) as of the date of the opinion. It does not address other aspects of the Merger or other transactions contemplated by the Merger Agreement, including the prices at which shares of Sunrun common stock would trade at any time in the future, the relative merits of the merger as compared to other business or financial strategies that might be available to Vivint Solar or any compensation or compensation agreements arising from (or relating to) the merger which benefit any officer, director or employee of Vivint Solar, or any class of such persons. The opinion was addressed to, and rendered for the benefit of, the Vivint Solar Board and was not intended to, and does not, constitute advice or a recommendation to any holder of shares of Vivint Solar common stock or any holder of shares of Sunrun common stock as to how to vote or act on any matter with respect to the merger or related transactions or any other action with respect to the transactions contemplated by the merger agreement, including the merger.

Opinion of BofA Securities, Inc.

In connection with the merger, on July 6, 2020, at a meeting of the Vivint Solar Board, BofA Securities, Inc., referred to as “BofA Securities”, delivered to the Vivint Solar Board an oral, which was subsequently confirmed by delivery of a written opinion dated July 6, 2020, as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of Vivint Solar common stock of the exchange ratio. The full text of the written opinion, dated July 6, 2020, of BofA Securities, which describes, among other things, the



 

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assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken, is attached as Annex D to this joint proxy statement/prospectus and is incorporated by reference herein in its entirety. BofA Securities provided its opinion to the Vivint Solar Board (in its capacity as such) for the benefit and use of the Vivint Solar Board in connection with and for purposes of its evaluation of the exchange ratio from a financial point of view. BofA Securities’ opinion does not address any other aspect of the proposed merger and no opinion or view was expressed as to the relative merits of the proposed merger in comparison to other strategies or transactions that might be available to Vivint Solar or in which Vivint Solar might engage or as to the underlying business decision of Vivint Solar to proceed with or effect the proposed merger. BofA Securities’ opinion does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed merger or any other matter.

Interests of Sunrun’s Directors and Executive Officers in the Merger (page 137)

Certain of Sunrun’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of stockholders of Sunrun generally. The members of the Sunrun Board were aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation, of the merger, in approving the merger agreement and the transactions contemplated thereby, including the merger, and in recommending that Sunrun stockholders approve (1) the Sunrun share issuance proposal and (2) the Sunrun adjournment proposal. Additional interests of the directors and executive officers of Sunrun in the merger include that the members of the Sunrun Board will continue to be directors of Sunrun and executive officers of Sunrun will continue to be executive officers of Sunrun following the consummation of the merger. Sunrun stockholders should take these interests into account in deciding whether to vote “FOR” the Sunrun share issuance proposal and the Sunrun adjournment proposal.

See the section entitled “The Merger—Interests of Sunrun’s Directors and Executive Officers in the Merger” beginning on page 137 of this joint proxy statement/prospectus for a more detailed description of these interests.

Interests of Vivint Solar’s Directors and Executive Officers in the Merger (page 137)

Certain of Vivint Solar’s directors and officers have interests in the merger that may be different from, or in addition to, the interests of Vivint Solar stockholders generally and that may present actual or potential conflicts of interest. The members of the Vivint Solar Board were aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation, of the merger, in approving the merger agreement and the transactions contemplated thereby, including the merger, and in recommending that the Vivint Solar stockholders approve (1) the Vivint Solar merger proposal, (2) the Vivint Solar merger-related compensation proposal and (3) the Vivint Solar adjournment proposal. Additional interests of the directors and executive officers of Vivint Solar in the merger include the treatment in the merger of Vivint Solar stock options or Vivint Solar RSU awards held by these directors and/or executive officers, as applicable, certain severance payments and other benefits that Vivint Solar executive officers are entitled to receive upon a qualifying termination of employment in connection with the completion of the merger, indemnification and insurance for current and former directors and executive officers of Vivint Solar as provided under the merger agreement, that at the completion of the merger, the Sunrun Board will be expanded to add two directors including David Bywater, Chief Executive Officer of Vivint Solar, and a member of the Vivint Solar Board, that David Bywater entered into an employment agreement with Sunrun providing for certain payments and benefits following the consummation of the merger, that L. Chance Allred, Chief Sales Officer of Vivint Solar, entered into an employment agreement with Sunrun providing for certain payments and benefits following the consummation of the merger, and that each executive officer of Vivint Solar is eligible for awards under a retention pool established in connection with the merger. Vivint Solar stockholders should take these interests



 

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into account in deciding whether to vote “FOR” the Vivint Solar merger proposal, the Vivint Solar merger-related compensation proposal and the Vivint Solar adjournment proposal.

See the section entitled “The Merger—Interests of Vivint Solar’s Directors and Executive Officers in the Merger” beginning on page 137 of this joint proxy statement/prospectus for a more detailed description of these interests.

The Sunrun Virtual Special Meeting (page 53)

Time, Place and Purpose of the Sunrun Virtual Special Meeting

The Sunrun virtual special meeting to consider and vote upon the Sunrun share issuance proposal and related matters will be held exclusively online via live audio-only webcast on October 1, 2020 at 8:00 am Pacific Time. The Sunrun virtual special meeting can be accessed by visiting http://virtualshareholdermeeting.com/Sunrun2020SM, where you will be able to vote your shares and submit questions during the Sunrun virtual special meeting webcast by logging in to the website listed above using the 16-digit control number included in your proxy card. Online check-in will begin at 7:50 am Pacific Time, and we encourage you to allow ample time for the online check-in procedures. Please note that you will not be able to attend the Sunrun virtual special meeting in person.

At the Sunrun virtual special meeting, Sunrun stockholders will be asked to consider and vote upon (1) the Sunrun share issuance proposal and (2) the Sunrun adjournment proposal.

Sunrun Record Date and Quorum

You are entitled to receive notice of, and to vote at, the Sunrun virtual special meeting if you are an owner of record of shares of Sunrun common stock as of the close of business on August 31, 2020, the Sunrun record date. As of the close of business on the Sunrun record date, there were 126,894,221 shares of Sunrun common stock outstanding and entitled to vote at the Sunrun virtual special meeting. Each share of Sunrun common stock outstanding on the Sunrun record date entitles the holder thereof to one vote on each proposal to be considered at the Sunrun virtual special meeting.

The presence at the Sunrun virtual special meeting, virtually or represented by proxy, of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote thereat, as of the Sunrun record date, will constitute a quorum for the transaction of business at the Sunrun virtual special meeting.

Vote Required

The Sunrun share issuance proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of Sunrun common stock, present or represented by proxy at the Sunrun virtual special meeting, and entitled to vote on the Sunrun share issuance proposal. If a Sunrun stockholder present at the Sunrun virtual special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the same effect as a vote cast “AGAINST” such proposal. If a Sunrun stockholder is not present at the Sunrun virtual special meeting and does not respond by proxy or does not provide his, her or its bank, broker or other nominee with instructions, as applicable, it will have no effect on the vote count for such proposal.

The Sunrun adjournment proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of Sunrun common stock, present or represented by proxy at the Sunrun virtual special meeting, and entitled to vote on the Sunrun adjournment proposal. If a Sunrun stockholder present at the Sunrun virtual special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the same effect as a vote cast “AGAINST” such proposal. If a Sunrun stockholder is not present at the Sunrun virtual special meeting and does not respond by proxy or does not provide his, her or its bank, broker or other nominee with instructions, as applicable, it will have no effect on the vote count for such proposal.



 

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Proxies and Revocations

Any Sunrun stockholder of record entitled to vote at the Sunrun virtual special meeting may submit a proxy by telephone, over the Internet, by returning the enclosed Sunrun proxy card in the accompanying prepaid reply envelope or may vote at the Sunrun virtual special meeting. If your shares of Sunrun common stock are held in “street name” through a bank, broker or other nominee, you should instruct your bank, broker or other nominee on how to vote your shares of Sunrun common stock using the instructions provided by your bank, broker or other nominee.

If you are a record holder, you may change or revoke your vote before your proxy is voted at the Sunrun virtual special meeting as described herein. You may do this in one of the following four ways: (1) by delivering to Sunrun’s Corporate Secretary (at Sunrun’s executive offices at 225 Bush Street, Suite 1400, San Francisco, California 94104) a signed written notice of revocation bearing a later date than the proxy, stating that the proxy is revoked, which revocation is received prior to the proxy’s exercise at the Sunrun virtual special meeting; (2) by duly executing a subsequently dated proxy relating to the same shares of Sunrun common stock and returning it in the postage-paid envelope provided, which subsequent proxy is received before the prior proxy is exercised at the Sunrun virtual special meeting; (3) by duly submitting a subsequently dated proxy relating to the same shares of Sunrun common stock by telephone or via the Internet before 11:59 pm Eastern Time on September 30, 2020; or (4) by attending the Sunrun virtual special meeting and voting such shares during the Sunrun virtual special meeting.

The Vivint Solar Virtual Special Meeting (page 60)

Time, Place and Purpose of the Vivint Solar Virtual Special Meeting

The Vivint Solar virtual special meeting to consider and vote upon the Vivint Solar merger proposal and related matters will be held exclusively online via live audio-only webcast on October 1, 2020 at 9:00 am Mountain Time. The Vivint Solar virtual special meeting can be accessed by visiting https://www.vivintsolar.com/2020specialmeeting, where you will be able to listen to the Vivint Solar virtual special meeting live, submit questions, and vote online. Please note that you will not be able to attend the Vivint Solar virtual special meeting in person.

At the Vivint Solar virtual special meeting, the Vivint Solar stockholders will be asked to consider and vote upon (1) the Vivint Solar merger proposal, (2) the Vivint Solar merger-related compensation proposal and (3) the Vivint Solar adjournment proposal.

Vivint Solar Record Date and Quorum

You are entitled to receive notice of, and to vote at, the Vivint Solar virtual special meeting if you are an owner of record of shares of Vivint Solar common stock as of the close of business on August 31, 2020, the Vivint Solar record date. As of the close of business on the Vivint Solar record date, there were 125,866,872 shares of Vivint Solar common stock outstanding and entitled to vote at the Vivint Solar virtual special meeting. Each share of Vivint Solar common stock outstanding on the Vivint Solar record date entitles the holder thereof to one vote on each proposal to be considered at the Vivint Solar virtual special meeting.

The presence at the Vivint Solar virtual special meeting, virtually or represented by proxy, of the holders of a majority of the voting power of the stock issued, outstanding and entitled to vote thereat as of the Vivint Solar record date, will constitute a quorum for the transaction of business at the Vivint Solar virtual special meeting.

Vote Required

The Vivint Solar merger proposal requires the affirmative vote of the holders of a majority of the shares of Vivint Solar common stock outstanding as of the close of business on the Vivint Solar record date and entitled to



 

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vote on the Vivint Solar merger proposal. If a Vivint Solar stockholder present at the Vivint Solar virtual special meeting abstains from voting, responds by proxy with an “abstain” vote, is not present at the Vivint Solar virtual special meeting and does not respond by proxy or does not provide his, her or its bank, broker or other nominee with instructions, as applicable, it will have the effect of a vote cast “AGAINST” such proposal.

The Vivint Solar merger-related compensation proposal requires the affirmative vote of the holders of a majority of the voting power of the shares, present or represented by proxy at the Vivint Solar virtual special meeting and entitled to vote on the Vivint Solar merger-related compensation proposal. If a Vivint Solar stockholder present at the Vivint Solar virtual special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the same effect as a vote cast “AGAINST” such proposal. If a Vivint Solar stockholder is not present at the Vivint Solar virtual special meeting and does not respond by proxy or does not provide his, her or its bank, broker or other nominee with instructions, as applicable, it will have no effect on the outcome for such proposal.

The Vivint Solar adjournment proposal requires the affirmative vote of the holders of a majority of the voting power of the shares, present or represented by proxy at the Vivint Solar virtual special meeting and entitled to vote on the Vivint Solar adjournment proposal. If a Vivint Solar stockholder present at the Vivint Solar virtual special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the same effect as a vote cast “AGAINST” such proposal. If a Vivint Solar stockholder is not present at the Vivint Solar virtual special meeting and does not respond by proxy or does not provide his, her or its bank, broker or other nominee with instructions, as applicable, it will have no effect on the vote count for such proposal.

Proxies and Revocations

Any Vivint Solar stockholder of record entitled to vote at the Vivint Solar virtual special meeting may submit a proxy by telephone, over the Internet, by returning the enclosed Vivint Solar proxy card in the accompanying prepaid reply envelope or may vote at the Vivint Solar virtual special meeting. If your shares of Vivint Solar common stock are held in “street name” through a bank, broker or other nominee, you should instruct your bank, broker or other nominee on how to vote your shares of Vivint Solar common stock using the instructions provided by your bank, broker or other nominee.

If you are a record holder, you may change or revoke your vote before your proxy is voted at the Vivint Solar virtual special meeting as described herein. You may do this in one of the following four ways: (1) by delivering, to Vivint Solar’s Secretary (at Vivint Solar’s principal executive offices located at 1800 West Ashton Boulevard, Lehi, Utah 84043), a signed written notice of revocation bearing a later date than the proxy, stating that the proxy is revoked, which revocation is received prior to the proxy’s exercise at the Vivint Solar virtual special meeting; (2) by duly executing a subsequently dated proxy relating to the same shares of Vivint Solar common stock and delivering it to Vivint Solar’s Secretary at the address in the clause above, which subsequent proxy is received before the prior proxy is exercised at the Vivint Solar virtual special meeting; (3) by duly submitting a subsequently dated proxy relating to the same shares of Vivint Solar common stock by telephone or via the Internet (using the original instructions provided to you) before 11:59 pm Eastern Time on September 30, 2020; or (4) by attending the Vivint Solar virtual special meeting and voting such shares during the Vivint Solar virtual special meeting.

Voting by Sunrun’s Directors and Executive Officers (page 54)

As of the close of business on the Sunrun record date, directors and executive officers of Sunrun and their affiliates owned and were entitled to vote 5,103,930 shares of Sunrun common stock, or approximately 4.0% of the shares of common stock outstanding on that date. It is expected that Sunrun’s directors and named executive officers will vote their shares of common stock in favor of each of the proposals to be considered at the Sunrun



 

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virtual special meeting, although none of such directors or executive officers have entered into an agreement obligating them to do so. For information with respect to Sunrun common stock owned by directors and executive officers of Sunrun, please see Sunrun’s definitive proxy statement on Schedule 14A, filed with the SEC on April 17, 2020 and incorporated by reference into this joint proxy statement/prospectus.

The number of shares reflected above does not include shares underlying outstanding Sunrun stock options or Sunrun restricted stock unit awards.

Voting by Vivint Solar’s Directors and Executive Officers (page 61)

As of the close of business on the Vivint Solar record date, directors and executive officers of Vivint Solar and their affiliates owned and were entitled to vote 621,641 shares of Vivint Solar common stock or approximately 0.5% of the shares of Vivint Solar common stock outstanding on that date. It is currently expected that Vivint Solar’s directors and executive officers will vote their shares of Vivint Solar common stock in favor of each of the proposals to be considered at the Vivint Solar virtual special meeting, although none of such directors or executive officers have entered into an agreement obligating them to do so. For information with respect to Vivint Solar common stock owned by directors and executive officers of Vivint Solar, please see Vivint Solar’s definitive proxy statement on Schedule 14A, filed with the SEC on April 24, 2020 and incorporated by reference into this joint proxy statement/prospectus.

The number of shares reflected above does not include shares underlying outstanding Vivint Solar stock options, Vivint Solar PSU awards, Vivint Solar RSU awards or Vivint Solar LTIP Awards.

Governance of Sunrun (page 147)

Board of Directors of Sunrun

The Sunrun Board as of the completion of the merger will have nine members, consisting of:

 

   

seven directors, each of whom is a member of the Sunrun Board as of the date of this joint proxy statement/prospectus and is anticipated to be a member of the Sunrun Board as of immediately before the completion of the merger, referred to as the Sunrun continuing directors;

 

   

David Bywater (who will be designated as a Sunrun Class I director); and

 

   

one director serving on the Vivint Solar Board who will be designated by Vivint Solar (who will be designated as a Sunrun Class III director).

Biographical information for David Bywater is incorporated by reference to Vivint Solar’s definitive proxy statement on Schedule 14A, filed with the SEC on April 24, 2020.

Regulatory Approvals (page 147)

Under the HSR Act and the rules promulgated thereunder, certain transactions may not be completed unless certain information has been furnished to the Antitrust Division of the United States Department of Justice, referred to as the Antitrust Division, and the United States Federal Trade Commission, referred to as the FTC, in Notification and Report Forms provided by the acquiring and acquired persons, and certain waiting period requirements have been satisfied. The completion of the merger is subject to such requirements. Sunrun and Blackstone Capital Partners VI, L.P., the ultimate parent entity of Vivint Solar, each filed their respective HSR Act Notification and Report forms on July 20, 2020. The parties subsequently elected to withdraw their Notification and Report Forms, effective as of August 19, 2020, and resubmitted their Notification and Report Forms on August 21, 2020.



 

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There can be no assurance that a challenge to the merger on antitrust or other regulatory grounds will not be made or, if such a challenge is made, that it would not be successful.

See the section entitled “The Merger—Regulatory Approvals” beginning on page 147 of this joint proxy statement/prospectus.

Litigation Relating to the Merger (page 148)

Starting on August 20, 2020, several complaints were filed by purported stockholders of Vivint Solar regarding the merger against Vivint Solar, each of the members of the Vivint Solar Board, Sunrun and Merger Sub. The first complaint, filed on an individual basis, contends that the Registration Statement on Form S-4 filed with the Commission by Sunrun on August 14, 2020, and serving as the preliminary joint proxy statement/prospectus, omitted or misrepresented material information regarding the merger. The complaint seeks injunctive relief, an award of plaintiff’s costs, including attorneys’ fees and expenses, and other remedies.

On August 21, 2020, a second complaint, filed as a putative class action complaint was filed against the same defendants in the Supreme Court of the State of New York. The complaint alleges that members of the Vivint Solar Board breached their fiduciary duties, and that the other defendants aided and abetted that alleged breach of fiduciary duties by, among other things, agreeing to an allegedly unfair and inadequate price, allegedly failing to disclose material information in the Registration Statement on Form S-4 filed with the Commission on August 14, 2020 and allegedly failing to protect against certain purported conflicts of interests. The complaint seeks injunctive relief, and monetary damages.

Additional complaints were filed on August 24, 25, 26, 27, and 31, 2020 in the United States District Court for the District of Delaware, the Eastern District of New York, and the Southern District of New York. Two of the complaints name as defendants each of the members of the Vivint Solar board and Vivint Solar (collectively, the “Vivint Solar Defendants”) and Sunrun and Merger Sub, while the four complaints filed in the Eastern and Southern Districts of New York name only the Vivint Solar Defendants. All assert violations of Section 14(a) and 20(a) of the Exchange Act and Rule 14a-9, alleging that the Registration Statement on Form S-4 omitted or misrepresented material information regarding the merger. The complaints filed between August 24 and August 27 all additionally assert a violation of Section 20(a) of the Exchange Act.

For a more detailed description of litigation in connection with the merger, see the section entitled “The Merger—Litigation Relating to the Merger” beginning on page 148 of this joint proxy statement/prospectus.

Conditions to the Merger (page 173)

In addition to the approval of the Sunrun share issuance proposal by Sunrun stockholders and of the Vivint Solar merger proposal by Vivint Solar stockholders, completion of the merger is subject to the satisfaction (or waiver to the extent permitted by law) of a number of other conditions, including:

 

   

the expiration or termination of the applicable waiting period under the HSR Act;

 

   

the effectiveness of the registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part;

 

   

approval of the listing on Nasdaq of the Sunrun common stock forming part of the merger consideration;

 

   

the absence of any order or law that has the effect of enjoining or otherwise making illegal the consummation of the merger;

 

   

receipt by each of Sunrun and Vivint Solar of an opinion of its respective outside counsel (or other nationally recognized law firm, including outside counsel to the other party) to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code;



 

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the absence of a material adverse effect with respect to Sunrun or Vivint Solar, as applicable, since the date of the merger agreement;

 

   

the accuracy of the representations and warranties of Sunrun or Vivint Solar, as applicable, made in the merger agreement (subject to the materiality standards set forth in the merger agreement);

 

   

the performance by Sunrun or Vivint Solar in all material respects, as applicable, of its covenants and obligations under the merger agreement; and

 

   

delivery of an officer’s certificate by each of Sunrun and Vivint Solar certifying satisfaction of the conditions described in the preceding three bullet points.

The parties expect to complete the merger after all of the conditions to the merger in the merger agreement are satisfied or waived, including after Sunrun receives stockholder approval of the Sunrun share issuance proposal at the Sunrun virtual special meeting and Vivint Solar receives stockholder approval of the Vivint Solar merger proposal at the Vivint Solar virtual special meeting and after Sunrun and Vivint Solar receive all required regulatory approvals. For a more complete description of the conditions to the merger, see the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 173 of this joint proxy statement/prospectus.

Expected Timing of the Transaction (page 149)

The parties expect the merger to be completed in the fourth quarter of 2020. Neither Sunrun nor Vivint Solar can predict, however, the actual date on which the merger will be completed because it is subject to conditions beyond each company’s control, including obtaining necessary regulatory approvals. For a more complete description of the conditions to the merger, see the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 173 of this joint proxy statement/prospectus.

Ownership of Sunrun after the Merger (page 196)

Based on the number of shares of Sunrun common stock and Vivint Solar common stock outstanding and reserved for issuance as of the Sunrun record date and the Vivint Solar record date, respectively, we estimate that, immediately following completion of the merger, former holders of Vivint Solar common stock will own approximately 35.5% of the common stock of Sunrun on a fully diluted basis and pre-merger holders of Sunrun common stock will own approximately 64.5% of the common stock of Sunrun on a fully diluted basis. The exact equity stake of Sunrun stockholders and Vivint Solar stockholders in Sunrun immediately following the merger will depend on the number of shares of Sunrun common stock and Vivint Solar common stock issued and outstanding immediately prior to the merger.

No Solicitation of Alternative Transactions; Change of Recommendation (page 165)

As more fully described in this joint proxy statement/prospectus and in the merger agreement, and subject to the exceptions summarized below, Vivint Solar and Sunrun have each agreed not to, and to cause its respective subsidiaries and its and their respective executive officers and directors not to, and to use reasonable best efforts to cause its joint ventures, its and its subsidiaries’ and joint ventures’ other representatives not to, directly or indirectly (1) initiate, solicit, or knowingly encourage or facilitate any inquiries with respect to or the making of, or that could reasonably be expected to lead to an alternative acquisition proposal (as defined in the section entitled “The Merger Agreement—Covenants and Agreements—No Solicitation of Alternative Transactions” beginning on page 165 of this joint proxy statement/prospectus) or (2) engage in any negotiations or discussions with any third party concerning any such alternative acquisition proposal or provide certain non-public information to any third party.



 

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The merger agreement includes certain exceptions to the non-solicitation covenant such that, prior to obtaining the Sunrun stockholders’ approval of the Sunrun share issuance proposal (the “Sunrun stockholder approval”) or the Vivint Solar stockholders’ approval of the Vivint Solar merger proposal (the “Vivint Solar stockholder approval”), Sunrun or Vivint Solar, as applicable, may participate in discussions and negotiations concerning an unsolicited alternative acquisition proposal if the Sunrun Board or Vivint Solar Board, as applicable, determines in good faith (after consultation with its outside counsel and financial advisors) that it constitutes or could reasonably be expected to result in or lead to a “superior proposal” (as defined in the section entitled “The Merger Agreement—Covenants and Agreements—No Solicitation of Alternative Transactions” beginning on page 165 of this joint proxy statement/prospectus). Also, each of the Sunrun Board and the Vivint Solar Board may, subject to complying with certain specified procedures, including providing Vivint Solar and Sunrun, as applicable, with a good faith opportunity to negotiate, (1) change its recommendation in favor of the Sunrun share issuance proposal or the Vivint Solar merger proposal, as applicable, in response to an unsolicited “superior proposal”, to the extent failure to do so would be inconsistent with its fiduciary duties under Delaware law, or (2) change its recommendation in favor of the Sunrun share issuance proposal or the Vivint Solar merger proposal, as applicable, in response to an “intervening event” (as defined in the section entitled “The Merger Agreement—Covenants and Agreements—Changes in Board Recommendations” beginning on page 167 of this joint proxy statement/prospectus) that becomes known after the date of the merger agreement but prior to the Sunrun stockholder approval or the Vivint Solar stockholder approval, as applicable, to the extent failure to do so would be inconsistent with its fiduciary duties under applicable law.

For a more complete description of the limitations on the solicitation of transaction proposals from third parties and the ability of the Sunrun Board or the Vivint Solar Board, as applicable, to change its respective recommendation with respect to the transaction, see the sections entitled “The Merger Agreement—Covenants and Agreements—No Solicitation of Alternative Transactions” and “The Merger Agreement—Covenants and Agreements—Changes in Board Recommendations” beginning on pages 165 and 167, respectively, of this joint proxy statement/prospectus.

Termination of the Merger Agreement (page 174)

The merger agreement may be terminated by mutual written consent of Sunrun, Merger Sub and Vivint Solar at any time before the completion of the merger. In addition, the merger agreement may be terminated by either Vivint Solar or Sunrun:

 

   

if the merger has not been completed by January 6, 2021 (as it may be extended in accordance with the merger agreement, referred to as the “End Date”), provided, that at any time in the five business days prior to the End Date, if certain closing conditions are not satisfied, either Sunrun or Vivint Solar may (in each case, in its sole and absolute discretion) elect to extend the End Date to July 6, 2021 and the End Date will be subject to an automatic extension by the number of days that any applicable law is enacted after the date of the merger agreement extending the applicable waiting period under the HSR Act in connection with any contagious disease, epidemic or pandemic (including the COVID-19 pandemic) (“Contagion Event”) however, in no event will the End Date be extended beyond October 6, 2021;

 

   

if the Vivint Solar stockholder approval has not been obtained at the Vivint Solar virtual special meeting or at any adjournment or postponement of such meeting;

 

   

if the Sunrun stockholder approval has not been obtained at the Sunrun virtual special meeting or at any adjournment or postponement of such meeting;

 

   

if any court or other governmental entity of competent jurisdiction shall have issued a final order, decree or ruling or taken any other final action permanently restraining, enjoining or otherwise prohibiting the merger and such order, decree, ruling or other action is or shall have become final and nonappealable;



 

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if Sunrun or Vivint Solar breaches or fails to perform any of its representations, warranties, covenants or other agreements in the merger agreement, which breach or failure to perform would result in the failure of a condition related to the accuracy of its representations and warranties or performance of its covenants in the merger agreement, subject to certain materiality thresholds and rights to cure and other limitations; or

 

   

at any time prior to the Sunrun virtual special meeting or Vivint Solar virtual special meeting, respectively, if the Sunrun Board (in the case of a termination by Vivint Solar) or the Vivint Solar Board (in the case of a termination by Sunrun) changes its recommendation to its stockholders to vote in favor of the transaction or the other party materially breaches certain covenants under the merger agreement to not solicit alternative transactions or to hold its virtual special meeting.

If the merger agreement is terminated as described above, the merger agreement will be void without liability or obligation on the part of any party, subject to certain exceptions, including as described below and that no party will be relieved from liability for any willful breach of the merger agreement, or fraud.

Expenses and Termination Fees (page 175)

The merger agreement provides for payment of a termination fee by Vivint Solar to Sunrun of $54 million in connection with a termination of the merger agreement under the circumstances described below:

 

   

if Sunrun terminates the merger agreement as a result of (i) the Vivint Solar Board making a change of recommendation or (ii) a material breach or failure to perform by Vivint Solar of certain of its covenants; or

 

   

if (1) Sunrun or Vivint Solar terminates the merger agreement because the merger has not yet been consummated by the End Date or because the Vivint Solar stockholder approval has not been obtained at the Vivint Solar virtual special meeting or at any adjournment or postponement of such meeting, or (2) Sunrun terminates the merger agreement as a result of a breach or failure to perform by Vivint Solar of certain of its covenants relating to non-solicitation, the joint proxy statement/prospectus, the Vivint Solar virtual special meeting, the Vivint Solar stockholder approval and takeover statutes and, in each case, an alternative acquisition proposal (with regard to 50% or more of the voting power, consolidated revenues, net income or assets of Vivint Solar) is made directly to the Vivint Solar stockholders or becomes publicly known or (in the case of Sunrun terminating pursuant to clause (2), is made directly to the Vivint Solar Board or Vivint Solar’s senior management), and Vivint Solar consummates an alternative acquisition proposal or enters into a definitive agreement with respect to an alternative acquisition proposal within 12 months of the termination.

The merger agreement provides for payment of a termination fee by Sunrun to Vivint Solar of $107 million in connection with a termination of the merger agreement under the following circumstances:

 

   

if Vivint Solar terminates the merger agreement as a result of (i) the Sunrun Board making a change of recommendation or (ii) a material breach or failure to perform by Sunrun of certain of its covenants; or

 

   

if (1) Vivint Solar or Sunrun terminates the merger agreement because the merger has not yet been consummated by the End Date or because the Sunrun stockholder approval has not been obtained at the Sunrun virtual special meeting or at any adjournment or postponement of such meeting or (2) Vivint Solar terminates the merger agreement as a result of a breach or failure to perform by Sunrun of certain of its covenants relating to non-solicitation, the joint proxy statement/prospectus, the Sunrun virtual special meeting, and, in each case, an alternative transaction (with regard to 50% or more of the voting power of Sunrun or 50% or more of the consolidated revenues, net income or assets of Sunrun) is made directly to the Sunrun stockholders or becomes publicly known or (in the case of Vivint Solar



 

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terminating pursuant to clause (2), is made directly to the Sunrun Board or Sunrun’s senior management), and Sunrun consummates an alternative acquisition proposal or enters into a definitive agreement with respect to an alternative acquisition proposal within 12 months of the termination.

The merger agreement also provides for a payment of a termination fee by Sunrun to Vivint Solar of $45 million in the event that the merger agreement is terminated by (1) Sunrun or Vivint Solar because (a) the merger has not yet been consummated by the End Date or (b) a court or other governmental entity of competent jurisdiction has issued a final order, decree or ruling or taken final action permanently restraining, enjoining or otherwise prohibiting the merger and such order, decree, ruling or action is final and nonappealable or (2) Vivint Solar based on a willful breach by Sunrun to perform certain of its covenants or agreements under the merger agreement relating to regulatory matters with respect to any antitrust or competition law of the United States, subject to certain conditions as provided in the merger agreement.

For a more complete description of each party’s termination rights and the related termination fee obligations, see the sections entitled “The Merger Agreement—Termination” and “The Merger Agreement—Expenses and Termination Fees” beginning on pages 174 and 175, respectively, of this joint proxy statement/prospectus

No Appraisal or Dissenters’ Rights in the Merger (page 149)

Holders of Sunrun common stock and holders of Vivint Solar common stock are not entitled to appraisal rights under the DGCL with respect to the merger. For more information, see the section entitled “The Merger—No Appraisal or Dissenters’ Rights in the Merger” beginning on page 149 of this joint proxy statement/prospectus.

The Ancillary Agreements (page 149)

Support Agreements

Simultaneously with the execution of the merger agreement, Sunrun and 313 Acquisition LLC (“313 Acquisition”), an affiliate of The Blackstone Group Inc. (“Blackstone”), entered into a support agreement (the “Sunrun support agreement”), pursuant to which 313 Acquisition agreed, among other things, to vote its shares of Vivint Solar common stock in favor of the adoption of the merger agreement and against any alternative proposal. On August 17, 2020, 313 Acquisition entered in a stock purchase agreement with Coatue US 24 LLC (“Coatue”), a vehicle affiliated with Coatue Management L.L.C., pursuant to which 313 Acquisition agreed to sell to Coatue 11,627,907 shares (the “Acquired Shares”) of Vivint Solar common stock (the “Coatue transaction”). Simultaneously with the Coatue transaction, 313 Acquisition and Sunrun amended the Sunrun support agreement to reflect 313 Acquisition’s revised ownership of Vivint Solar common stock (the “amended Sunrun support agreement”). 313 Acquisition’s obligations under the amended Sunrun support agreement are the same as its obligations under the Sunrun support agreement. As of the close of business on the Vivint Solar record date, 313 Acquisition owned approximately 46.0% of the outstanding shares of Vivint Solar.

On August 17, 2020, in connection with the Coatue transaction, Sunrun and Coatue entered into a support agreement (the “Coatue support agreement”), pursuant to which Coatue agreed, among other things, to vote its shares of Vivint Solar common stock in favor of the adoption of the merger agreement and against any alternative proposal. The number of shares of Vivint Solar common stock subject to the Coatue support agreement and the amended Sunrun support agreement are equal, in the aggregate, to the number of shares of Vivint Solar common stock subject to the original Sunrun support agreement. As of the close of business on the Vivint Solar record date, Coatue owned approximately 9.2% of the outstanding shares of Vivint Solar.

Also simultaneously with the execution of the merger agreement, Vivint Solar, Tiger Global Investments, L.P. and Tiger Global Long Opportunities Master Fund, L.P. (“Tiger Global”) entered into a support agreement



 

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(the “Vivint Solar support agreement”), pursuant to which Tiger Global agreed, among other things, to vote its shares of Sunrun common stock in favor of the approval of the issuance of shares of Sunrun common stock pursuant to the merger agreement and against any alternative proposal. As of the close of business on the Sunrun record date, Tiger Global owned approximately 23.5% of the outstanding shares of Sunrun.

For additional information, see the section entitled “The Merger—The Ancillary Agreements” beginning on page 149 of this joint proxy statement/prospectus.

Registration Rights Agreement

Simultaneously with the execution of the merger agreement and to be effective as of the closing of the merger, Sunrun, 313 Acquisition and certain other current indirect stockholders of Vivint Solar (collectively, the “Holders” and each, a “Holder”) entered into a registration rights agreement (the “registration rights agreement”), pursuant to which the Holders agreed, among other things, that if Sunrun registers its securities for public sale or sale pursuant to the exercise of any demand rights, Sunrun will, at the request of a Holder, dispose of such shares of Sunrun common stock held by such Holder.

For additional information, see the section entitled “The Merger—The Ancillary Agreements—Registration Rights Agreement” beginning on page 151 of this joint proxy statement/prospectus.

Coatue Lock-Up Agreement

Simultaneously with the execution of the Coatue support agreement, Sunrun and Coatue entered into a lock-up agreement (the “Coatue lock-up agreement”), pursuant to which Coatue agreed to certain transfer restrictions with respect to the shares of Sunrun common stock Coatue will receive in connection with the merger in respect of its Acquired Shares (such shares of Sunrun common stock, the “Acquired Sunrun Shares”), subject to certain exceptions including that (i) 50% of the Acquired Sunrun Shares will become unrestricted 60 days following the consummation of the Merger and (ii) subject to certain conditions, the remainder of the Acquired Sunrun Shares will become unrestricted 120 days following the consummation of the Merger.

For addition information, see the section entitled “The Merger—The Ancillary Agreements—Coatue Lock-Up Agreement” beginning on page 152 of this joint proxy statement/prospectus.

Material U.S. Federal Income Tax Consequences of the Merger (page 179)

The obligations of the parties to complete the merger are conditioned on, among other things, the receipt by each of Sunrun and Vivint Solar of an opinion from its respective outside counsel (or other nationally recognized law firm, including outside counsel to the other party), each dated and based on the facts and law existing as of the closing date of the merger and relying upon customary assumptions and certain representations made by Sunrun and Vivint Solar, that for U.S. federal income tax purposes the merger will qualify as a ‘‘reorganization’’ within the meaning of Section 368(a) of the Code. Provided the merger qualifies as a “reorganization”, U.S. holders (as defined in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 179 of this joint proxy statement/prospectus) of shares of Vivint Solar common stock generally will not recognize any gain or loss for U.S. federal income tax purposes upon the receipt of Sunrun common stock in exchange for Vivint Solar common stock in the merger (other than gain or loss, if any, with respect to any cash received in lieu of a fractional share of Sunrun common stock).

The material U.S. federal income tax consequences of the merger are discussed in more detail in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 179 of this joint proxy statement/prospectus. The discussion of the material U.S. federal income tax consequences contained in



 

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this joint proxy statement/prospectus is intended to provide only a general discussion and is not a complete analysis or description of all potential U.S. federal income tax consequences of the merger that may vary with, or are dependent on, individual circumstances. In addition, it does not address tax considerations under state, local or foreign laws or U.S. federal laws other than those pertaining to U.S. federal income tax.

Accounting Treatment (page 152)

Sunrun prepares its financial statements in accordance with accounting principles generally accepted in the United States, referred to as GAAP. The merger will be accounted for as an acquisition of Vivint Solar by Sunrun under the acquisition method of accounting in accordance with GAAP. Sunrun will be treated as the acquiror for accounting purposes. In identifying Sunrun as the accounting acquiror, Sunrun and Vivint Solar considered the structure of the transaction and other actions contemplated by the merger agreement, relative outstanding share ownership and market values, the composition of the Sunrun Board, the relative size of Sunrun and Vivint Solar, and the designation of certain senior management positions of Sunrun.

Rights of Vivint Solar Stockholders Will Change as a Result of the Merger (page 196)

Vivint Solar stockholders will have different rights once they become Sunrun stockholders due to differences between the organizational documents of Sunrun and Vivint Solar. These differences are described in more detail under the section entitled “Comparative Rights of Stockholders” beginning on page 196 of this joint proxy statement/prospectus.

Listing of Sunrun Common Stock and Delisting and Deregistration of Vivint Solar Common Stock (page 152)

Prior to the completion of the merger, Sunrun has agreed to use its reasonable best efforts to cause the shares of Sunrun common stock to be issued in connection with the merger to be approved for listing on Nasdaq. The listing of the shares of Sunrun common stock on Nasdaq, subject to official notice of issuance, is also a condition to completion of the merger.

If the merger is completed, Vivint Solar common stock will cease to be listed on NYSE and Vivint Solar common stock will be deregistered under the Exchange Act.

Risk Factors (page 39)

You should consider all the information contained in or incorporated by reference into this joint proxy statement/prospectus in deciding how to vote for the proposals presented in this joint proxy statement/prospectus. In particular, you should carefully consider the risks that are described in the section entitled “Risk Factors” beginning on page 39 of this joint proxy statement/prospectus.



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SUNRUN

The following table presents selected historical consolidated financial data for Sunrun. The selected historical consolidated financial data of Sunrun presented below for the years ended December 31, 2019, 2018 and 2017 and as of December 31, 2019 and 2018 have been derived from Sunrun’s consolidated financial statements and accompanying notes contained in Sunrun’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data of Sunrun presented below for the year ended December 31, 2016 and as of December 31, 2017 and 2016 are derived from Sunrun’s audited consolidated financial statements and accompanying notes contained in Sunrun’s Annual Report on Form 10-K for the year ended December 31, 2018, which are not incorporated into this joint proxy statement/prospectus by reference. The selected historical consolidated financial data of Sunrun presented below for the years ended December 31, 2015 and as of December 31, 2016 and 2015 are derived from Sunrun’s audited consolidated financial statements for such years and accompanying notes, which are not incorporated into this joint proxy statement/prospectus by reference. The selected historical consolidated financial data of Sunrun presented below for the six months ended June 30, 2020 and 2019 and as of June 30, 2020 have been derived from Sunrun’s unaudited consolidated financial statements, and the accompanying notes thereto, for the and as of the six months ended June 30, 2020 contained in Sunrun’s Quarterly Report on Form 10-Q, which is incorporated by reference into this proxy statement/prospectus. The unaudited consolidated balance sheet as of June 30, 2019 has been derived from Sunrun’s unaudited consolidated financial statements and related notes thereto contained in Sunrun’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, which has not been incorporated by reference into this proxy statement/prospectus.



 

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The information set forth below is not necessarily indicative of future results, is only a summary and should be read together with Sunrun’s historical consolidated financial statements, related notes, and management’s discussion and analysis of financial condition and results of operations contained in Sunrun’s respective Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as well as other information that has been filed with the SEC. See the section entitled “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus.

 

    As of and for the Six Months
Ended June 30,
    As of and for the Year Ended December 31,  

(Dollars and shares in thousands,
except per share amounts)

          2020                     2019             2019     2018     2017     2016     2015  

Consolidated Balance Sheet

 

     

Cash and restricted cash

  $ 354,232     $ 353,867     $ 363,229     $ 304,399     $ 241,790     $ 224,363     $ 221,161  

Solar energy systems, net

    4,774,425       4,149,883       4,492,615       3,820,017       3,161,570       2,629,366       1,992,021  

Total Assets

    6,005,042       5,207,380       5,806,341       4,749,787       3,963,136       3,572,818       2,734,592  

Recourse debt, current portion

    —         239,035       —         —         —         —         —    

Non-recourse debt, current portion

    105,381       35,158       35,348       35,484       21,529       14,153       4,722  

Recourse debt, net of current portion

    236,435       —         239,485       247,000       247,000       244,000       197,000  

Non-recourse debt, net of current portion

    2,081,725       1,688,989       1,980,107       1,466,438       1,026,416       639,870       333,042  

Total equity

    1,241,505       1,209,087       1,331,432       1,282,782       1,240,516       924,186       659,560  

Consolidated Statements of Operations

             

Revenue

  $ 392,025     $ 399,099     $ 858,578     $ 759,981     $ 532,542     $ 477,107     $ 304,606  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

    (244,098     (191,491     (391,022     (260,186     (287,615     (320,839     (248,906
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income available to common stockholders

  $ (41,521   $ (15,155   $ 26,335     $ 26,657     $ 125,489     $ 75,129     $ (53,136
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income available to common stockholders

             

Basic

  $ (0.35   $ (0.13   $ 0.23     $ 0.24     $ 1.19     $ 0.73     $ (0.96
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $ (0.35   $ (0.13   $ 0.21     $ 0.23     $ 1.16     $ 0.72     $ (0.96
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares used to compute net (loss) income per share available to common stockholders

             

Basic

    120,201       114,843       116,397       110,089       105,432       102,367       55,091  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

    120,201       114,843       123,876       117,112       108,206       104,964       55,091  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

The Company’s consolidated assets as of June 30, 2020 and December 31, 2019 include $3,948,923 and $3,521,202, respectively, in assets of variable interest entities (“VIEs”) that can only be used to settle obligations of the VIEs. These assets include solar energy systems, net, as of June 30, 2020 and December 31, 2019 of $3,557,831 and $3,259,712, respectively; cash as of June 30, 2020 and December 31, 2019 of $155,239 and $133,362, respectively; restricted cash as of June 30, 2020 and December 31, 2019 of $12,411 and $2,746, respectively; accounts receivable, net as of June 30, 2020 and December 31, 2019 of $25,530 and $21,956, respectively; inventories as of June 30, 2020 and December 31, 2019 of $94,175 and 15,721, respectively; prepaid expenses and other current assets as of June 30, 2020 and December 31, 2019 of $1,480 and $554, respectively; and other assets as of June 30, 2020 and December 31, 2019 of $102,257 and $87,151, respectively. The Company’s consolidated liabilities as of June 30, 2020 and December 31, 2019 include $894,449 and $774,564, respectively, in liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include accounts payable as of June 30, 2020 and December 31, 2019 of $14,306 and $11,531, respectively; distributions payable to noncontrolling interests and redeemable noncontrolling interests as of June 30,



 

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  2020 and December 31, 2019 of $17,701 and $16,012, respectively; accrued expenses and other current liabilities as of June 30, 2020 and December 31, 2019 of $14,095 and $10,740, respectively; deferred revenue as of June 30, 2020 and December 31, 2019 of $506,486 and $482,138, respectively; deferred grants as of June 30, 2020 and December 31, 2019 of $27,516 and $28,034, respectively; non-recourse debt as of June 30, 2020 and December 31, 2019 of $277,416 and $206,476, respectively; and other liabilities as of June 30, 2020 and December 31, 2019 of $36,929 and $19,633, respectively.
(2)

Reflects the impact of the adoption of new accounting standards in 2018 related to revenue recognition and leases.



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF VIVINT SOLAR

The following table presents selected historical consolidated financial data for Vivint Solar. The selected historical consolidated financial data of Vivint Solar presented below for the years ended December 31, 2019 and 2018 and as of December 31, 2019 and 2018 have been derived from Vivint Solar’s consolidated financial statements and accompanying notes contained in Vivint Solar’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data of Vivint Solar presented below for the years ended December 31, 2017, 2016 and 2015 and as of December 31, 2017, 2016 and 2015 are derived from Vivint Solar’s audited consolidated financial statements for such years and accompanying notes, which are not incorporated into this joint proxy statement/prospectus by reference. The selected historical condensed consolidated financial data of Vivint Solar presented below for the six months ended June 30, 2020 and 2019 and as of June 30, 2020 have been derived from Vivint Solar’s unaudited condensed consolidated financial statements, and the accompanying notes thereto, as of and for the six months ended June 30, 2020 contained in Vivint Solar’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, which is incorporated by reference into this proxy statement/prospectus. The unaudited condensed consolidated balance sheet as of June 30, 2019 has been derived from Vivint Solar’s unaudited condensed consolidated financial statements and related notes thereto contained in Vivint Solar’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, which has not been incorporated by reference into this proxy statement/prospectus.



 

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The information set forth below is not necessarily indicative of future results, is only a summary and should be read together with Vivint Solar’s historical consolidated financial statements, related notes, and management’s discussion and analysis of financial condition and results of operations contained in Vivint Solar’s respective Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as well as other information that has been filed with the SEC. See the section entitled “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus.

 

    As of and for the Six Months
Ended June 30,
    As of and for the Year Ended December 31,  

(Dollars and shares in thousands,
except per share amounts)

          2020                     2019             2019     2018     2017     2016     2015  

Consolidated Balance Sheet

             

Cash, cash equivalents, and restricted cash and cash equivalents

  $ 422,946     $ 277,518     $ 255,940     $ 290,896     $ 154,938     $ 123,439     $ 107,248  

Solar energy systems, net

    1,873,031       1,637,905       1,759,861       1,938,874       1,673,532       1,458,355       1,102,157  

Total Assets

    3,105,308       2,510,650       2,799,390       2,327,255       2,463,929       2,126,356       1,609,070  

Current portion of long-term debt

    24,664       144,243       16,405       12,155       13,585       6,252       —    

Long-term debt, net of current portion

    1,794,990       1,181,797       1,483,256       1,203,282       925,964       750,728       415,850  

Total equity

    187,090       320,386       277,216       362,212       861,066       666,834       609,252  

Consolidated Statements of Operations

             

Revenue

  $ 197,545     $ 160,128     $ 341,041     $ 290,321     $ 268,028     $ 135,167     $ 64,182  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

    (209,681     (176,895     (423,320     (279,563     8,470       (242,537     (253,265
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income available to common stockholders

  $ (41,501   $ (54,809   $ (102,175   $ (15,592   $ 209,098     $ 17,986     $ 13,080  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic

  $ (0.33   $ (0.45   $ (0.84   $ (0.13   $ 1.85     $ 0.17     $ 0.12  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $ (0.33   $ (0.45   $ (0.84   $ (0.13   $ 1.77     $ 0.16     $ 0.12  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares used to compute net (loss) income per share available to common stockholders

             

Basic

    124,383       120,589       121,310       117,565       113,132       108,190       106,088  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

    124,383       120,589       121,310       117,565       118,268       112,538       109,858  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Vivint Solar’s assets as of June 30, 2020 and December 31, 2019 include $2,368.4 million and $2,194.3 million consisting of assets of variable interest entities (“VIEs”) that can only be used to settle obligations of the VIEs. These assets include cash and cash equivalents of $56.9 million and $82.8 million as of June 30, 2020 and December 31, 2019; accounts receivable, net, of $23.9 million and $8.9 million as of June 30, 2020 and December 31, 2019; prepaid expenses and other current assets of $2.1 million and $1.7 million as of June 30, 2020 and December 31, 2019; restricted cash and cash equivalents of $10.1 million and $8.9 million as of June 30, 2020 and December 31, 2019; solar energy systems, net, of $1,683.8 million and $1,587.4 million as of June 30, 2020 and December 31, 2019; and other non-current assets, net of $591.6 million and $504.7 million as of June 30, 2020 and December 31, 2019. The Company’s liabilities as of June 30, 2020 and December 31, 2019 include $297.6 million and $233.4 million of liabilities of VIEs whose creditors have no recourse to the Company. These liabilities include distributions payable to non-controlling interests and redeemable non-controlling interests of $15.5 million and $10.3 million as of June 30, 2020 and December 31, 2019; accrued and other current liabilities of $6.7 million and $6.4 million as of June 30, 2020 and December 31, 2019; long-term debt of $254.5 million and $201.6 million as of June 30, 2020 and December 31, 2019; deferred revenue of $20.7 million and $14.8 million as of June 30, 2020 and December 31, 2019; and other non-current liabilities of $0.3 million each period as of June 30, 2020 and December 31, 2019.

(2)

Reflects the impact of the adoption of new accounting standards in 2018 related to revenue recognition and in 2019 related to leases.



 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following table shows selected unaudited pro forma condensed combined financial information about the financial condition and results of operations of Sunrun after giving effect to the merger as described in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 182 of this joint proxy statement/prospectus. The selected unaudited pro forma condensed combined statement of operations data for the six months ended June 30, 2020 and for the year ended December 31, 2019 give effect to the merger if it occurred on January 1, 2019, the first day of Sunrun’s 2019 fiscal year. The selected unaudited pro forma condensed combined balance sheet data as of June 30, 2020 gives effect to the merger as if it occurred on June 30, 2020.

The selected pro forma data have been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial information of Sunrun appearing elsewhere in this joint proxy statement/prospectus and the accompanying notes to the pro forma financial information. Additionally, the unaudited pro forma condensed combined financial information contains estimated adjustments, based upon available information and certain assumptions that we believe are reasonable under the circumstances. The assumptions underlying the pro forma adjustments are described in greater detail in the section entitled “Notes to Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 187 of this joint proxy statement/prospectus. In addition, the pro forma financial information was based on, and should be read in conjunction with, the historical consolidated financial statements and related notes of Sunrun and Vivint Solar for the applicable periods, which have been incorporated in this joint proxy statement/prospectus by reference. See the sections entitled “Unaudited Pro Forma Condensed Combined Financial Information” and “Where You Can Find More Information” beginning on pages 182 and 217 of this joint proxy statement/prospectus for additional information. The summary pro forma information is preliminary, based on initial estimates of the fair value of assets acquired (including intangible assets) and liabilities assumed, and is subject to change as more information regarding the fair values are obtained, which changes could be materially different than the initial estimates.

 

(Dollars, in thousands, except per share amounts)

   Six Months Ended
June 30, 2020
    Year Ended
December 31, 2019
 

Pro Forma Statement of Operations Data:

    

Total revenues

   $ 588,759     $ 1,198,759  

Net loss attributable to common stockholders

     (63,771     (42,459

Net loss per share common stock, basic and diluted

   $ (0.34   $ (0.23
    

(Dollars, in thousands)

    As of
June 30, 2020
 

Pro Forma Balance Sheet Data:

 

Working capital

 

  $ 348,148  

Total assets

 

    11,801,620  

Current portion of long-term debt(1)

 

    130,045  

Long-term debt, net of current portion(2)

 

    4,207,892  

Redeemable non-controlling interests and non-controlling interests in subsidiaries

 

    1,101,145  

 

(1)

Includes the current portion of solar asset-backed notes and term loans of $120.0 million included in current non-recourse debt and revolving lines of credit of $10.0 million included in accrued expenses and other liabilities.

(2)

Includes the non-current portion of solar asset-backed notes, term loans and revolving lines of credit.



 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table summarizes per share data (1) for Sunrun and Vivint Solar on a historical basis, (2) for Sunrun on an unaudited pro forma combined basis giving effect to the merger and (3) on an unaudited pro forma combined equivalent basis.

The unaudited pro forma net income (loss) per share for the year ended December 31, 2019 reflects the merger as if it had occurred on January 1, 2019. The book value per share as of June 30, 2020 reflects the merger as if it had occurred on June 30, 2020 and the book value per share as of December 31, 2019 reflects the merger as if it had occurred on December 31, 2019. The information in the table is based on, and should be read together with, the historical financial information of Sunrun and Vivint Solar which is incorporated by reference in this joint proxy statement/prospectus and the financial information contained under “Unaudited Pro Forma Combined Financial Information”, “Selected Historical Financial Data—Selected Historical Consolidated Financial Data of Sunrun” and “Selected Historical Financial Data—Selected Historical Consolidated Financial Data of Vivint Solar.” See the section entitled “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus.

The unaudited pro forma combined per share data is presented for illustrative purposes only and is not necessarily indicative of actual or future financial position or results of operations that would have been realized if the merger had been completed as of the dates indicated or will be realized upon the completion of the merger. The summary pro forma information is preliminary, based on initial estimates of the fair value of assets acquired (including intangible assets) and liabilities assumed, and is subject to change as more information regarding the fair values are obtained, which changes could be materially different than the initial estimates.

 

     Historical
Sunrun
     Historical
Vivint
Solar
     Unaudited Pro
Forma
Combined
 

Basic net income (loss) per share of common stock:

        

Six months ended June 30, 2020

   $ (0.35    $ (0.33    $ (0.34

Twelve months ended December 31, 2019

   $ 0.23      $ (0.84    $ (0.23

Diluted net income (loss) per share of common stock:

        

Six months ended June 30, 2020

   $ (0.35    $ (0.33    $ (0.34

Twelve months ended December 31, 2019

   $ 0.21      $ (0.84    $ (0.23

Cash dividends declared per share:

        

Six months ended June 30, 2020

   $ —        $ —        $ —    

Twelve months ended December 31, 2019

   $ —        $ —        $ —    

Book value per share:(1)

        

As of June 30, 2020

   $ 7.27      $ 1.09      $ 16.64  

As of December 31, 2019

   $ 8.14      $ 1.55      $ n/m (2) 

 

(1)

The historical book value per share is computed by dividing total stockholders’ equity by the number of shares outstanding at the end of the relevant period.

(2)

Pro forma book value per share as of December 31, 2019 is not meaningful as purchase accounting adjustments were calculated as of June 30, 2020.

 

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COMPARATIVE PER SHARE MARKET PRICE INFORMATION AND IMPLIED VALUE OF MERGER CONSIDERATION

The following table sets forth, for the periods indicated, the high and low closing sales prices per share for Sunrun common stock, which trades on Nasdaq under the symbol “RUN”, and for Vivint Solar common stock, which trades on NYSE under the symbol “VSLR”, on (1) July 6, 2020, the last trading day before the public announcement of the merger, and (2) September 1, 2020 the last full trading day for which high and low sales prices were available as of the date of this joint proxy statement/prospectus.

The table also includes the estimated equivalent high and low sales prices per share of Vivint Solar common stock on those dates. These equivalent high and low sales prices per share reflect the fluctuating value of Sunrun common stock that Vivint Solar stockholders would receive in exchange for each share of Vivint Solar common stock if the merger were completed on either of these dates, applying the exchange ratio of 0.55 shares of Sunrun common stock for each share of Vivint Solar common stock.

 

     Sunrun Common Stock      Vivint Solar Common Stock      Equivalent Price per
Share
 
         High              Low              High              Low          High      Low  

July 6, 2020

   $ 21.695      $ 20.53      $ 10.86      $ 10.30      $ 11.93      $ 11.29  

September 1, 2020

   $ 58.47      $ 55.13      $ 31.97      $ 30.13      $ 32.16      $ 30.32  

The market prices of shares of Sunrun common stock and Vivint Solar common stock have fluctuated since the date of the announcement of the parties’ entry into the merger agreement and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date the merger is completed, and the market price of shares of Sunrun common stock will continue to fluctuate after the completion of the merger. No assurance can be given concerning the market prices of Sunrun common stock or Vivint Solar common stock before completion of the merger or of the market price of the common stock of Sunrun after completion of the merger. Because the exchange ratio is fixed and will not be adjusted for changes in the market price of either Sunrun common stock or Vivint Solar common stock, the market price of Sunrun common stock (and, therefore, the value of the merger consideration) when received by Vivint Solar stockholders after the merger is completed could be greater than, less than or the same as shown in the table above. The above table shows only historical comparisons. These comparisons may not provide meaningful information to Sunrun stockholders in determining whether to approve the Sunrun share issuance proposal or the Vivint Solar stockholders in determining whether to approve the Vivint Solar merger proposal. Sunrun and Vivint Solar stockholders are urged to obtain current market quotations for Sunrun and Vivint Solar common stock and to review carefully the other information contained in this joint proxy statement/prospectus or incorporated by reference into this joint proxy statement/prospectus in considering whether to approve the issuance of shares of Sunrun common stock in the merger in the case of Sunrun stockholders, and whether to adopt the merger agreement in the case of Vivint Solar stockholders. See the section entitled “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements based upon or relating to Sunrun’s and Vivint Solar’s expectations, assumptions, estimates, and projections. Forward-looking statements generally relate to future events or future financial or operating performance. In some cases, you can identify forward-looking statements by terms such as “may”, “will”, “should”, “would”, “expects”, “plans”, “anticipates”, “could”, “intends”, “target”, “projects”, “contemplates”, “believes”, “estimates”, “predicts”, “potential”, “will be”, “will likely result” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements may include, but are not limited to, statements concerning the expected benefits of the transaction; cost synergies and opportunities resulting from the transaction; Sunrun’s leadership position in the industry; the availability of rebates, tax credits and other financial incentives including solar renewable energy certificates, or SRECs, and federal and state incentives; regulations and policies related to net metering and interconnection limits or caps and decreases to federal solar tax credits; determinations by the Internal Revenue Service of the fair market value of Sunrun’s and Vivint Solar’s solar energy systems; changes in regulations, tariffs and other trade barriers and tax policy; the retail price of utility-generated electricity or electricity from other energy sources; federal, state and local regulations and policies governing the electric utility industry and developments or changes with respect to such regulations and policies; the ability of Sunrun and Vivint Solar to manage their supply chains (including the availability and price of solar panels and other system components and raw materials) and distribution channels and the impact of natural disasters and other events beyond their control; the ability of Sunrun and Vivint Solar and their industry to manage recent and future growth, product offering mix, and costs (including, but not limited to, equipment costs) effectively, including attracting, training and retaining sales personnel and solar energy system installers; Sunrun’s and Vivint Solar’s strategic partnerships and expected benefits of such partnerships; the sufficiency of Sunrun’s and Vivint Solar’s cash, investment fund commitments and available borrowings to meet anticipated cash needs; the need and ability of Sunrun and Vivint Solar to raise capital, refinance existing debt and finance their respective obligations and solar energy systems from new and existing investors; the potential impact of interest rates on Sunrun’s and Vivint Solar’s interest expense; the course and outcome of litigation and investigations and the ability of Sunrun and Vivint Solar to consummate the transactions contemplated by the merger agreement in a timely manner or at all. These statements are not guarantees of future performance; they reflect Sunrun’s and Vivint Solar’s current views with respect to future events and are based on assumptions and estimates and subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements. Such risks, uncertainties and other factors include, without limitation:

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement or the failure to satisfy the closing conditions;

 

   

the possibility that the consummation of the proposed transactions, including the merger, is delayed or does not occur, including the failure of the parties’ stockholders to approve the proposed transactions;

 

   

uncertainty regarding the timing of the receipt of required regulatory approvals for the merger and the possibility that the parties may be required to accept conditions that could reduce or eliminate the anticipated benefits of the merger as a condition to obtaining regulatory approvals or that the required regulatory approvals might not be obtained at all;

 

   

the outcome of any legal proceedings that have been or may be instituted against the parties or others following announcement of the transactions contemplated by the merger agreement;

 

   

challenges, disruptions and costs of closing, integrating and achieving anticipated synergies, or that such synergies will take longer to realize than expected;

 

   

risks that the merger and other transactions contemplated by the merger agreement disrupt current plans and operations that may harm the parties’ businesses;

 

   

the amount of any costs, fees, expenses, impairments and charges related to the merger;

 

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uncertainty as to the effects of the announcement or pendency of the merger on the market price of the parties’ respective common stock and/or on their respective financial performance;

 

   

uncertainty as to the long-term value of Sunrun’s and Vivint Solar’s common stock;

 

   

the ability of Sunrun and Vivint Solar to raise capital from third parties, including fund investors, to grow their business;

 

   

any rise in interest rates which would increase the cost of capital;

 

   

the business, economic and political conditions in the markets in which Sunrun and Vivint Solar operate;

 

   

the ability to meet covenants in investment funds and debt facilities;

 

   

the potential inaccuracy of the assumptions employed in calculating operating metrics;

 

   

the failure of the energy industry to develop to the size or at the rate Sunrun and Vivint Solar expect; and

 

   

the inability of Sunrun and Vivint Solar to finance their solar service offerings to customers on an economically viable basis.

These risks and uncertainties may be amplified by the ongoing COVID-19 pandemic, which has caused significant economic uncertainty and negative impacts on capital and credit markets. The extent to which the COVID-19 pandemic impacts Sunrun’s and Vivint Solar’s businesses, operations, and financial results, including the duration and magnitude of such effects, will depend on numerous factors, many of which are unpredictable, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the pandemic or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

Any financial projections in this joint proxy statement/prospectus are forward-looking statements that are based on assumptions that are inherently subject to significant uncertainties and contingencies, many of which are beyond Sunrun’s and Vivint Solar’s control. While all projections are necessarily speculative, Sunrun and Vivint Solar believe that the preparation of prospective financial information involves increasingly higher levels of uncertainty the further out the projection extends from the date of preparation. The assumptions and estimates underlying the projected results are inherently uncertain and are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the projections. The inclusion of projections in this joint proxy statement/prospectus should not be regarded as an indication that Sunrun and Vivint Solar, or their representatives, considered or consider the projections to be a reliable prediction of future events.

Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein under “Risk Factors” and elsewhere, including the risk factors included in Sunrun’s and Vivint Solar’s most recent reports on Form 10-K, Form 10-Q, Form 8-K and other documents on file with the SEC. See the section entitled “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus. These forward-looking statements represent estimates and assumptions only as of the date made. Unless required by federal securities laws, Sunrun and Vivint Solar assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made. Given these uncertainties, investors should not place undue reliance on these forward-looking statements. Investors should read this document with the understanding that Sunrun’s and Vivint Solar’s actual future results may be materially different from what Sunrun and Vivint Solar expect. Sunrun and Vivint Solar qualify all of their forward-looking statements by these cautionary statements.

 

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RISK FACTORS

In addition to the other information included or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements” beginning on page 37 of this joint proxy statement/prospectus, you should carefully consider the following risks before deciding whether to vote in favor of the Sunrun share issuance proposal and Vivint Solar merger proposal, respectively. In addition, you should read and consider the risks associated with each of Sunrun and Vivint Solar and their respective businesses. Descriptions of some of these risks can be found in Sunrun’s and Vivint Solar’s respective Annual Reports on Form 10-K for the year ended December 31, 2019, as updated or supplemented by subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. For further information regarding the documents incorporated into this joint proxy statement/prospectus by reference, please see the section entitled “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus.

Risks Relating to the Merger

The merger is subject to conditions, some or all of which may not be satisfied or completed on a timely basis, if at all. Failure to complete the merger could have material adverse effects on Sunrun and Vivint Solar.

The completion of the merger is subject to a number of conditions, including, among other things, the receipt of the Sunrun stockholder approval and the Vivint Solar stockholder approval and receipt of certain regulatory approvals, which make the completion and timing of the merger uncertain. See the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 173 of this joint proxy statement/prospectus for a more detailed discussion. The failure to satisfy all of the required conditions could delay the completion of the merger for a significant period of time or prevent it from occurring at all. There can be no assurance that the conditions to the completion of the merger will be satisfied or waived, that the merger will be completed or that the merger will be consummated as contemplated by the merger agreement.

If the merger is not completed or is completed on different terms than as contemplated by the merger agreement, each of Sunrun and Vivint Solar may be materially adversely affected and, without realizing any of the benefits of having completed the merger, will be subject to a number of risks, including the following:

 

   

the market price of Sunrun common stock or Vivint Solar common stock could decline;

 

   

reputational harm due to the adverse perception of any failure to successfully complete the merger could result;

 

   

each of Sunrun and Vivint Solar could owe a substantial termination fee to the other party in specified circumstances;

 

   

if the merger agreement is terminated and the Sunrun Board or the Vivint Solar Board seeks another business combination, Sunrun stockholders or Vivint Solar stockholders, as applicable, cannot be certain that Sunrun or Vivint Solar, as applicable, will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that the other party has agreed to in the merger agreement;

 

   

time and resources, financial and otherwise, committed by Sunrun’s and Vivint Solar’s management to matters relating to the merger could otherwise have been devoted to pursuing other beneficial opportunities;

 

   

Sunrun or Vivint Solar may experience negative reactions from the financial markets or from its customers, suppliers, strategic partners, investors and employees

 

   

Sunrun and Vivint Solar are currently subject to and could be subject to additional litigation related to the merger or any failure to complete the merger or related to any enforcement proceeding commenced against Sunrun or Vivint Solar in connection with the merger;

 

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Sunrun and Vivint Solar’s abilities to retain current key employees or attract new employees may be harmed; and

 

   

Sunrun and Vivint Solar will each be required to pay its costs relating to the merger, such as, for example, legal, accounting, financial advisory and printing fees, whether or not the merger is completed.

Any delay in completing the merger may reduce or eliminate the expected benefits from the merger.

The merger is subject to a number of conditions beyond Sunrun’s and Vivint Solar’s control that may prevent, delay or otherwise materially adversely affect its completion. Sunrun and Vivint Solar cannot predict whether and when these conditions will be satisfied. There can be no assurance that either Sunrun or Vivint Solar or both parties will waive any condition to closing that is not satisfied. Furthermore, the requirements for obtaining the required clearances and approvals and the time required to satisfy any other conditions to the closing could delay the completion of the merger for a significant period of time or prevent it from occurring. Any delay in completing the merger could cause Sunrun or Vivint Solar not to realize some or all of the benefits that it expects to achieve if the merger is successfully completed within its expected timeframe. Further, delays in the completion of the merger could also result in additional transaction costs, loss of revenue or other negative effects associated with delay and uncertainty about the completion of the merger and could materially and adversely impact Sunrun’s and Vivint Solar’s ongoing business, financial condition, financial results and stock price following the completion of the merger. See the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 173 of this joint proxy statement/prospectus.

The merger is subject to the expiration or termination of applicable waiting periods and the receipt of approvals, consents or clearances from regulatory authorities that may impose conditions that could have an adverse effect on Sunrun or Vivint Solar or, if any such approvals, consents or clearances are not obtained, could prevent completion of the merger.

Before the merger may be completed, any applicable waiting period (and any extension thereof) under the HSR Act relating to the completion of the merger must have expired or terminated. In deciding whether to terminate or allow the applicable waiting period to expire, the relevant governmental entities will consider the effect of the merger within their relevant jurisdiction, including, among other things, the impact on the parties’ respective customers and suppliers. The terms and conditions of the authorizations and consents that are granted, if any, may impose requirements, limitations or costs or place restrictions on the conduct of Sunrun’s or Vivint Solar’s business or may materially delay the completion of the merger.

In addition, at any time before or after the completion of the merger, and notwithstanding the termination of applicable waiting periods under the HSR Act, the applicable regulatory authorities or any state attorney general could take such action under antitrust or other applicable laws as such authority deems necessary or desirable in the public interest. Such actions could include, among other things, seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of the parties. In addition, in some circumstances, a third party could initiate a private action challenging, seeking to enjoin, or seeking to impose conditions on, the merger. Sunrun and Vivint Solar may not prevail and may incur significant costs in defending or settling any such action. For a more detailed description of the regulatory review process, see the section entitled “The Merger—Regulatory Approvals” beginning on page 147 of this joint proxy statement/prospectus.

There can be no assurance that the conditions to the completion of the merger set forth in the merger agreement relating to applicable regulatory laws will be satisfied.

 

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The merger agreement contains provisions that limit Sunrun’s and Vivint Solar’s ability to pursue alternatives to the merger, could discourage a potential third-party acquiror or merger partner from making an alternative transaction proposal, and provide that, in specified circumstances, each of Sunrun and Vivint Solar would be required to pay a termination fee.

The merger agreement contains provisions that make it more difficult for each of Sunrun and Vivint Solar to be acquired by, or enter into certain combination transactions with, a third party. The merger agreement contains certain provisions that restrict each of Sunrun’s and Vivint Solar’s ability to, among other things, solicit, initiate or knowingly encourage or facilitate any alternative transaction, engage in any discussions or negotiations with any third party concerning any alternative transaction, or provide nonpublic information to any third party. In addition, following receipt by either of Sunrun or Vivint Solar of any alternative transaction proposal that constitutes a “superior proposal”, each of Vivint Solar or Sunrun, respectively, will have an opportunity to offer to modify the terms of the merger agreement before the Sunrun Board or the Vivint Solar Board, respectively, may withdraw or qualify its recommendation with respect to the Sunrun share issuance proposal or the Vivint Solar merger proposal, respectively, in favor of such superior proposal, as described further under “The Merger Agreement—Covenants and Agreements—Changes in Board Recommendations.”

These provisions could discourage a potential third-party acquiror or merger partner that might have an interest in acquiring or combining with all or a significant portion of Sunrun or Vivint Solar or pursuing an alternative transaction from considering or proposing such a transaction.

In certain circumstances, upon termination of the merger agreement, Vivint Solar would be required to pay a termination fee of $54 million to Sunrun, and in certain circumstances, upon termination of the merger agreement, Sunrun would be required to pay a termination fee of $45 million or $107 million to Vivint Solar, each as contemplated by the merger agreement. For further discussion, see the sections entitled “The Merger Agreement—Termination” and “The Merger Agreement—Expenses and Termination Fees” beginning on pages 174 and 175, respectively, of this joint proxy statement/prospectus.

If the merger agreement is terminated and either of Sunrun or Vivint Solar determines to seek another business combination transaction, Sunrun or Vivint Solar may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the merger.

The exchange ratio is fixed and will not be adjusted in the event of any change in either Sunrun’s or Vivint Solar’s stock price or changes in operating results of either company.

Upon completion of the merger, each share of Vivint Solar common stock issued and outstanding immediately prior to the effective time (other than shares of Vivint Solar common stock owned by Sunrun, Merger Sub, any other wholly owned subsidiary of Sunrun or Vivint Solar immediately prior to the effective time, including shares of Vivint Solar common stock held in treasury by Vivint Solar, and in each case not held on behalf of third parties) will be converted into the right to receive the merger consideration, which is equal to 0.55 fully paid and nonassessable shares of Sunrun common stock and, if applicable, cash in lieu of fractional shares, less any applicable withholding taxes. This exchange ratio was fixed in the merger agreement and will not be adjusted for changes in the market price of either Sunrun common stock or Vivint Solar common stock between the dates of the signing of the merger agreement and the completion of the merger or otherwise (including a result of changes in operating results of either company).

Because the exchange ratio is fixed, changes in the price of Sunrun common stock prior to the merger will affect the value of the merger consideration that Vivint Solar stockholders will receive on the date of the merger. It is impossible to accurately predict the market price of Sunrun common stock at the completion of the merger and, therefore, impossible to accurately predict the market value of the shares of Sunrun common stock that Vivint Solar stockholders will receive in the merger. The market price for Sunrun common stock may fluctuate both prior to the completion of the merger and thereafter for a variety of reasons, including, among others,

 

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general market and economic conditions, the demand for Sunrun’s or Vivint Solar’s products and services, changes in laws and regulations, the COVID-19 pandemic, other changes in Sunrun’s and Vivint Solar’s respective businesses, operations, prospects and financial results of operations, market assessments of the likelihood that the merger will be completed, and the expected timing of the merger. Many of these factors are beyond Sunrun’s and Vivint Solar’s control. As a result, the market value represented by the exchange ratio will also vary.

We cannot assure you that, following the merger, the combined market price of Sunrun will equal or exceed what the combined market price of Sunrun common stock and Vivint Solar common stock would have been in the absence of the merger. It is possible that after the merger, the equity value of Sunrun will be less than the combined equity value of Sunrun and Vivint Solar before the merger.

Each party is subject to business uncertainties and contractual restrictions while the merger is pending, which could adversely affect each party’s business and operations.

In connection with the pendency of the merger, it is possible that some customers, suppliers, strategic partners and other persons with whom Sunrun and/or Vivint Solar has a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with Sunrun or Vivint Solar, as the case may be, as a result of the merger or otherwise, which could negatively affect Sunrun’s or Vivint Solar’s respective revenues, earnings and/or cash flows, as well as the market price of Sunrun common stock or Vivint Solar common stock, regardless of whether the merger is completed.

Until the merger is completed, the merger agreement restricts each of Sunrun and Vivint Solar from taking specified actions without the consent of the other party, and requires each of Sunrun and Vivint Solar to operate in the ordinary and usual course of business consistent with past practice. Sunrun and Vivint Solar are subject to a number of interim operating covenants relating to, among other things, amendment of organizational documents, payment of dividends or entry into certain acquisitions or investments. Such limitations could adversely affect each of Sunrun’s and Vivint Solar’s business and operations prior to the completion of the merger.

Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the merger. For further discussion, see the sections entitled “The Merger Agreement—Covenants and Agreements—Conduct of Business of Vivint Solar” and “The Merger Agreement—Covenants and Agreements—Conduct of Business of Sunrun” beginning on pages 161 and 164, respectively, of this joint proxy statement/prospectus.

Completion of the merger may trigger change in control or other provisions in certain customer and other agreements to which Sunrun or Vivint Solar is a party, which may have an adverse impact on the combined company’s business and result of operations following completion of the merger.

The completion of the merger may trigger change in control and other provisions in certain agreements to which Sunrun or Vivint Solar is a party. If Sunrun or Vivint Solar is unable to negotiate waivers of those provisions, counterparties may exercise their rights and remedies under the agreements, including terminating the agreements or seeking monetary damages or equitable remedies. Even if Sunrun or Vivint Solar is able to negotiate a consent or waiver, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Sunrun or Vivint Solar. Any of the foregoing or similar developments may have an adverse impact on Sunrun’s and Vivint Solar’s business and results of operations following completion of the merger.

 

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Uncertainties associated with the merger may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of Sunrun following completion of the merger.

Sunrun and Vivint Solar are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. Sunrun’s success after the completion of the merger will depend in part upon the ability of Sunrun to retain certain key management personnel and employees of Sunrun and Vivint Solar. Prior to the completion of the merger, current and prospective employees of Sunrun and Vivint Solar may experience uncertainty about their roles following the completion of the merger, which may have an adverse effect on the ability of each of Sunrun and Vivint Solar to attract or retain key management and other key personnel. In addition, no assurance can be given that Sunrun, after the completion of the merger, will be able to attract or retain key management personnel and other key employees to the same extent that Sunrun and Vivint Solar have previously been able to attract or retain their own employees.

The merger will involve substantial costs.

Sunrun and Vivint Solar have incurred and expect to continue to incur substantial costs and expenses relating directly to the merger and the Sunrun share issuance, including fees and expenses payable to financial advisors, other professional fees and expenses, insurance premium costs, fees and costs relating to regulatory filings and notices, SEC filing fees, printing and mailing costs and other transaction-related costs, fees and expenses. If the merger is not completed, Sunrun and Vivint Solar will have incurred substantial expenses for which no ultimate benefit will have been received by either company.

The unaudited pro forma condensed combined financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and may not be reflective of the operating results and financial condition of Sunrun following completion of the merger.

The unaudited pro forma condensed combined financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what Sunrun’s actual financial position or results of operations would have been had the merger been completed on the dates indicated. The unaudited pro forma condensed combined financial information is subject to a number of assumptions, and does not take into account any synergies related to the merger. Further, Sunrun’s actual results and financial position after the merger may differ materially and adversely from the unaudited pro forma condensed combined financial data that are included in this joint proxy statement/prospectus. The unaudited pro forma condensed combined financial information reflects adjustments based upon preliminary estimates of the fair value of assets to be acquired and liabilities to be assumed. The final acquisition accounting will be based upon the actual consideration transferred and the fair value of the assets and liabilities of Vivint Solar as of the date of the completion of the merger. Accordingly, the final acquisition accounting may differ materially from the unaudited pro forma condensed combined financial information reflected in this joint proxy statement/prospectus. For further discussion, see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 182 of this joint proxy statement/prospectus. For more information, see the section entitled “Selected Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 34 of this joint proxy statement/prospectus.

The fairness opinions obtained by the Sunrun Board and the Vivint Solar Board from their respective financial advisors will not be updated to reflect changes in circumstances between signing the merger agreement and the completion of the merger.

Neither the Sunrun Board nor the Vivint Solar Board has obtained an updated fairness opinion as of the date of this joint proxy statement/prospectus from Credit Suisse, Sunrun’s financial advisor, or Morgan Stanley or BofA Securities, Vivint Solar’s financial advisors. Changes in the operations and prospects of Sunrun or Vivint Solar, general market and economic conditions, and other factors that may be beyond the control of Sunrun and

 

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Vivint Solar and on which the fairness opinions were based, including the COVID-19 pandemic that has caused higher than normal volatility in the financial markets generally, may alter the value of Sunrun or Vivint Solar or the trading prices of Sunrun or Vivint Solar common stock by the time the merger is completed.

The fairness opinions do not speak as of the time the merger will be completed or as of any date other than the dates of such opinions. Neither Sunrun nor Vivint Solar anticipates asking their respective financial advisors to update their fairness opinions. The fairness opinions of Credit Suisse, Morgan Stanley and BofA Securities are included as Annexes B, C and D, respectively, to this joint proxy statement/prospectus. For a description of the fairness opinion that the Sunrun Board received from its financial advisor and a summary of the material financial analyses the financial advisor provided to the Sunrun Board in connection with rendering such opinion, see the section entitled “The Merger—Opinion of Sunrun’s Financial Advisor” beginning on page 98 of this joint proxy statement/prospectus. For a description of the opinions that the Vivint Solar Board received from its financial advisors and a summary of the material financial analyses such financial advisors provided to the Vivint Solar Board in connection with rendering such opinions, see the section entitled “The Merger—Opinions of Vivint Solar’s Financial Advisors” beginning on page 106 of this joint proxy statement/prospectus.

For a description of the factors considered by the Sunrun Board in determining to approve the merger and the Sunrun share issuance, see the section entitled “The Merger—Reasons for the Merger—Sunrun Board’s Recommendation and Reasons for the Merger” beginning on page 89 of this joint proxy statement/prospectus. For a description of the factors considered by the Vivint Solar Board in determining to approve the merger agreement and the merger, see the section entitled “The Merger— Reasons for the Merger—Vivint Solar Board’s Recommendation and Reasons for the Merger” beginning on page 94 of this joint proxy statement/prospectus.

Sunrun’s executive officers and directors and Vivint Solar’s executive officers and directors have interests in the merger that may be different from, or in addition to, Sunrun’s stockholders’ and Vivint Solar’s stockholders’ interests.

In considering the recommendation of the Sunrun Board that Sunrun stockholders approve the Sunrun share issuance proposal and Sunrun adjournment proposal and the recommendation of the Vivint Solar Board that Vivint Solar stockholders approve the Vivint Solar merger proposal, the Vivint Solar merger-related compensation proposal and the Vivint Solar adjournment proposal, stockholders should be aware that certain directors and executive officers of Sunrun and certain directors and executive officers of Vivint Solar have interests in the merger that may be different from, or in addition to, the interests of such stockholders generally. The Sunrun Board was aware of the interests of Sunrun’s directors and executive officers, the Vivint Solar Board was aware of the interests of Vivint Solar’s directors and executive officers, and each board carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation, of the merger, in approving the merger agreement and the transactions contemplated thereby, including the merger, and in making its recommendations to its stockholders. Additional interests of the directors and executive officers of Sunrun in the merger include that the members of the Sunrun Board will continue to be directors of Sunrun and executive officers of Sunrun will continue to be executive officers of Sunrun following the consummation of the merger. Additional interests of the directors and executive officers of Vivint Solar in the merger include the treatment in the merger of Vivint Solar stock options or Vivint Solar RSU awards held by these directors and/or executive officers, as applicable, certain severance payments and other benefits that Vivint Solar executive officers are entitled to receive upon a qualifying termination of employment in connection with the completion of the merger, indemnification and insurance for current and former directors and executive officers of Vivint Solar as provided under the merger agreement, that at the completion of the merger, the Sunrun Board will be expanded to add two directors including David Bywater, Chief Executive Officer of Vivint Solar, and another member of the Vivint Solar Board, that David Bywater entered into an employment agreement with Sunrun providing for certain payments and benefits following the consummation of the merger, that L. Chance Allred, Chief Sales Officer of Vivint Solar, entered into an employment agreement with Sunrun providing for certain payments and benefits following the consummation of the merger, and that each executive officer of Vivint Solar is eligible for awards under a retention pool established in connection with the merger. See the sections entitled

 

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“The Merger—Interests of Sunrun’s Directors and Executive Officers in the Merger” and “The Merger—Interests of Vivint Solar’s Directors and Executive Officers in the Merger” beginning on page 137 of this joint proxy statement/prospectus for a more detailed description of these interests. As a result of these interests, these directors (as applicable) and executive officers might be more likely to support and to vote in favor of the proposals described in this joint proxy statement/prospectus than if they did not have these interests. Sunrun stockholders and Vivint Solar stockholders should consider whether these interests might have influenced these directors (as applicable) and executive officers to recommend voting in favor of the Sunrun share issuance proposal and the Vivint Solar merger proposal, respectively.

Following the merger, the composition of the Sunrun Board will be different than the current composition.

The Sunrun Board currently consists of seven directors. At or prior to the effective time, Sunrun will increase the number of directors that comprise the Sunrun Board at the effective time by two directors and fill such newly created directorships with (1) one director serving on the Vivint Solar Board who will be designated by Vivint Solar (who will be designated as a Sunrun Class III director) and (2) David Bywater (who will be designated as a Sunrun Class I director). See the section entitled “The Merger—Governance of Sunrun” beginning on page 158 of this joint proxy statement/prospectus. This new composition of the Sunrun Board may affect the future decisions of Sunrun.

Vivint Solar stockholders will not be entitled to dissenters’ or appraisal rights in the merger.

Dissenters’ or appraisal rights are statutory rights that, if applicable under law, enable stockholders of a corporation to dissent from an extraordinary transaction, such as a merger, and to demand that such corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Under the DGCL, stockholders do not have appraisal rights if the shares of stock they hold, at the record date for determination of stockholders entitled to vote at the meeting of stockholders to act upon the merger or consolidation, are either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders. Notwithstanding the foregoing, appraisal rights are available if stockholders are required by the terms of the merger agreement to accept for their shares anything other than (a) shares of stock of the surviving corporation, (b) shares of stock of another corporation that will either be listed on a national securities exchange or held of record by more than 2,000 holders, (c) cash in lieu of fractional shares or (d) any combination of clauses (a)-(c).

Because Vivint Solar common stock is listed on NYSE, a national securities exchange, and is expected to continue to be so listed on the record date, and because the merger otherwise satisfies the foregoing requirements, holders of Vivint Solar common stock will not be entitled to dissenters’ or appraisal rights in the merger with respect to their shares of Vivint Solar common stock.

The COVID-19 pandemic has led to periods of significant volatility in financial and other markets and could harm the business and results of operations for each of Sunrun and Vivint Solar following the completion of the merger.

The COVID-19 pandemic is having an unprecedented impact on the U.S. economy as federal, state and local governments react to this public health crisis, and has impacted, and could continue to impact, the business of each of Sunrun and Vivint Solar and created significant uncertainties for the solar industry and the economy in general. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19 pandemic on the businesses of Sunrun and Vivint Solar, and there is no guarantee that efforts by Sunrun and Vivint Solar to address the adverse impacts of the COVID-19 pandemic will be effective. The impact to date has included periods of significant volatility in financial and other markets. This volatility, if it continues, could have an adverse impact on Sunrun’s and Vivint Solar’s customers, businesses, financial conditions and results of operations.

 

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In addition, recent actions by U.S. federal and state governments to address the COVID-19 pandemic, including travel restrictions, quarantines, return-to-work restrictions and site closures, may also have a significant adverse effect on the jurisdictions in which Sunrun and Vivint Solar conduct their businesses as well as on the companies’ ability to staff sales and operations centers and install and maintain solar energy systems in the field. The extent of impacts resulting from the COVID-19 pandemic and other events beyond the control of Sunrun and Vivint Solar will depend on future developments, which are highly uncertain and cannot be predicted.

In addition, the COVID-19 pandemic has resulted in business disruption to Sunrun and Vivint Solar, and whether either company is able to recover from such a business disruption on a timely basis, the merger and Sunrun’s business, financial conditions and results of operations following the completion of the merger could be adversely affected. The merger and efforts to integrate the businesses of Sunrun and Vivint Solar may also be delayed and/or adversely affected by the COVID-19 pandemic, and become more costly. Each of Sunrun and Vivint Solar may incur additional costs to remedy damages caused by such disruptions, which could adversely affect their businesses, financial conditions and results of operations.

The amended and restated bylaws of Sunrun will govern Sunrun following the merger and provide that a state or federal court located within the State of Delaware will be the sole and exclusive forum for substantially all intracorporate disputes between Sunrun and its stockholders and the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, which could limit Sunrun stockholders’ ability to obtain a favorable judicial forum for disputes with Sunrun or its directors, officers or employees.

Sunrun’s amended and restated bylaws (the “Sunrun bylaws”) provide that, unless Sunrun consents to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on Sunrun’s behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of Sunrun’s directors, officers or other employees to Sunrun or to its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or (iv) any action asserting a claim governed by the internal affairs doctrine, shall in each case be a state or federal court located within the state of Delaware, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. In addition, to prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, the Sunrun bylaws also provide that, unless Sunrun consents to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions in a corporation’s certificate of incorporation are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, Sunrun would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of the Sunrun bylaws. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with Sunrun or its directors, officers, or other employees, which may discourage lawsuits against Sunrun and its directors, officers and other employees. If a court were to find either exclusive forum provision in the Sunrun bylaws to be inapplicable or unenforceable in an action, Sunrun may incur significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm its business, financial conditions and results of operation.

 

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Vivint Solar’s amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all intracorporate disputes between Vivint Solar and its stockholders and the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, which could limit Vivint Solar’s stockholders’ ability to obtain a favorable judicial forum for disputes with Vivint Solar or its directors, officers or employees.

Vivint Solar’s amended and restated certificate of incorporation (the “Vivint Solar certificate of incorporation”) provides that, to the fullest extent permitted by law and unless it consents to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any (1) derivative action or proceeding brought on behalf of Vivint Solar, (2) action asserting a claim of breach of a fiduciary duty owed by any of Vivint Solar’s directors or officers to Vivint Solar or its stockholders, (3) action asserting a claim against Vivint Solar or any of its directors or officers arising pursuant to any provision of the DGCL, the Vivint Solar certificate of incorporation or the Vivint Solar bylaws or (4) action asserting a claim governed by the internal affairs doctrine. In addition, to prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, Vivint Solar’s amended and restated bylaws (as amended, the “Vivint Solar bylaws”) provide that, unless Vivint Solar consents to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions in a corporation’s certificate of incorporation are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, Vivint Solar would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of the Vivint Solar certificate of incorporation and the Vivint Solar bylaws. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with Vivint Solar or its directors, officers, or other employees, which may discourage lawsuits against Vivint Solar and its directors, officers and other employees. If a court were to find either the exclusive-forum provision in the Vivint Solar certificate of incorporation or the exclusive-forum provision in the Vivint Solar bylaws to be inapplicable or unenforceable in an action, Vivint Solar may incur significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm Vivint Solar’s business, financial conditions and results of operation.

An adverse judgment in any litigation challenging the merger may prevent the merger from becoming effective or from becoming effective within the expected timeframe.

Whether or not the merger is completed, each of Sunrun and Vivint Solar could be subject to litigation related to the merger or any failure to complete the merger or related to any enforcement proceeding commenced against Sunrun or Vivint Solar to perform its obligations under the merger agreement. In particular, litigation related to the merger has been filed against each of Sunrun, Merger Sub, Vivint Solar and each of the members of the Vivint Solar Board and it is possible that Sunrun stockholders and Vivint Solar stockholders may file additional lawsuits challenging the merger or the other transactions contemplated by the merger agreement, which may name Sunrun, the Sunrun Board, Merger Sub, Vivint Solar and/or the Vivint Solar Board as defendants. Any of these risks could materially and adversely impact Sunrun’s or Vivint Solar’s ongoing business, financial condition, financial results and stock price. The outcome of any such lawsuits cannot be assured, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims. If plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the merger on the agreed-upon terms, such an injunction may delay the consummation of the merger in the expected timeframe, or may prevent the merger from being consummated altogether. Whether or not any plaintiff’s claim is successful, this type of litigation may result in significant costs

 

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and divert management’s attention and resources, which could adversely affect Sunrun’s and Vivint Solar’s businesses, financial conditions and results of operations.

As a result of the merger, Vivint Solar may be subject to adverse California property tax consequences and may seek to engage in certain financing transactions with a third party prior to the closing of the merger in an effort to mitigate such risk.

The State of California provides an exclusion (the “Solar Exclusion”) from the assessment of California property taxes for qualifying “active solar energy systems” installed as fixtures before January 1, 2025, provided such systems are locally rather than centrally assessed (“Eligible Property”). However, the Solar Exclusion is not a permanent exclusion from the assessment of property tax. Once a change in ownership of the Eligible Property occurs, the Eligible Property may be subject to reassessment and California property taxes may become due.

Vivint Solar, through certain of its subsidiaries, owns solar energy systems that constitute Eligible Property (the “California PV Systems”). To the extent Vivint Solar or its subsidiaries are considered the tax owners of the California PV Systems for purposes of the California Revenue and Tax Code (“CR&T”), the merger could result in a change of control of the California PV Systems triggering the loss of the Solar Exclusion and the imposition of California property taxes, which could be significant to the business of Vivint Solar and the combined company.

In order to potentially avoid triggering a change in ownership of the California PV Systems, Vivint Solar and Sunrun are contemplating the sale by Vivint Solar to a third party of 50% of the interests in a portfolio of solar systems, including a significant number of the California PV Systems, to be effected immediately prior to the consummation of the merger (the “Cash Equity Transaction”). Any Cash Equity Transaction would be structured with the intention that neither the Cash Equity Transaction nor the merger would trigger a change in ownership under the CR&T and therefore potentially maintain the Solar Exclusion and avoid the imposition of the California property taxes described above. In connection with any Cash Equity Transaction, the parties will seek to minimize capital costs, increase liquidity, and limit the impact of property taxes and any income taxes that may be payable resulting from the Cash Equity Transaction or the merger. There can be no assurance that any Cash Equity Transaction will be completed and, even if it is, there can be no assurance that the merger will not result in the imposition of California real property tax.

Risks Relating to Sunrun Upon Completion of the Merger

Sunrun may be unable to successfully integrate the business of Vivint Solar and realize the anticipated benefits of the merger.

The success of the merger will depend, in part, on Sunrun’s ability to successfully integrate Vivint Solar’s business, and realize the anticipated benefits, including synergies, cost savings, innovation and technological opportunities and operational efficiencies from the merger in a manner that does not materially disrupt existing customer, strategic partner, supplier and employee relationships and does not result in decreased revenues due to losses of customers, or decreases in sales of its products and service offerings. If Sunrun is unable to achieve these objectives within the anticipated timeframe, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, and the value of Sunrun common stock may decline. Sunrun may fail to realize some or all of the anticipated benefits of the merger if the integration process takes longer than expected or is more costly than expected.

The integration of Vivint Solar into Sunrun may result in material challenges, including, without limitation:

 

   

managing a larger, more complex combined business;

 

   

maintaining employee morale and retaining key management and other employees;

 

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retaining existing business and operational relationships, including customers, strategic partners, suppliers and employees and other counterparties, as may be impacted by contracts containing consent and/or other provisions that may be triggered by the merger, and attracting new business and operational relationships;

 

   

consolidating corporate and administrative infrastructures and eliminating duplicative operations, including unanticipated issues in integrating information technology, communications and other systems;

 

   

coordinating geographically separate organizations; and

 

   

unforeseen expenses or delays associated with the merger.

Many of these factors will be outside of Sunrun’s and/or Vivint Solar’s control, and any one of them could result in delays, increased costs, decreases in the amount of expected revenues and other adverse impacts, which could materially affect Sunrun’s financial position, results of operations and cash flows following the completion of the merger.

Due to legal restrictions, Sunrun and Vivint Solar are currently permitted to conduct only limited planning for the integration of Vivint Solar into Sunrun following the completion of the merger. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized on a timely basis, if at all.

Activities undertaken during the pendency of the merger to complete the merger and the other transactions contemplated by the merger agreement may divert management attention and resources.

If the efforts and actions required of Sunrun and Vivint Solar in order to consummate the merger and the other transactions contemplated by the merger agreement are more difficult, costly or time consuming than expected, such efforts and actions could result in the diversion of each company’s management’s attention and resources or the disruption or interruption of, or the loss of momentum in, each company’s ongoing businesses, which could adversely affect the businesses, financial results and results of operations of Sunrun and Vivint Solar, as applicable.

Upon completion of the merger, Vivint Solar stockholders will have different rights under Sunrun’s governing documents than they do currently under Vivint Solar’s governing documents.

Upon completion of the merger, Vivint Solar stockholders will no longer be stockholders of Vivint Solar, but will instead become stockholders of Sunrun and their rights as stockholders will be governed by the terms of the Sunrun certificate of incorporation and the Sunrun bylaws. The terms of the Sunrun certificate of incorporation and the Sunrun bylaws will be in some respects different than the terms of the Vivint Solar certificate of incorporation and the Vivint Solar bylaws, which currently govern the rights of Vivint Solar stockholders.

For a more complete description of the different rights associated with shares of Vivint Solar common stock and shares of Sunrun common stock after the completion of the merger, see the section entitled “Comparative Rights of Stockholders” beginning on page 196 of this joint proxy statement/prospectus.

Current Sunrun and Vivint Solar stockholders will be diluted by the merger.

Sunrun stockholders and Vivint Solar stockholders currently have the right to vote for their respective directors and on other matters affecting their respective companies. Immediately after the completion of the merger, each Sunrun stockholder will remain a stockholder of Sunrun, but with a percentage ownership that will be smaller than such stockholder’s percentage of Sunrun as of immediately prior to the merger, and each Vivint

 

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Solar stockholder will become a stockholder of Sunrun, but with a percentage ownership that will be smaller than such stockholder’s percentage of Vivint Solar immediately prior to the merger. As a result of this reduced ownership percentage, Sunrun stockholders and Vivint Solar stockholders will generally have less voting power after the merger than they did prior to the merger. We estimate that, based on the number of shares of Sunrun common stock and Vivint Solar common stock outstanding and reserved for issuance as of the close of business on the Sunrun record date and the Vivint Solar record date, respectively, immediately following completion of the merger, former holders of Vivint Solar common stock will own approximately 35.5% of the common stock of Sunrun on a fully diluted basis and pre-merger holders of Sunrun common stock will own approximately 64.5% of the common stock of Sunrun on a fully diluted basis.

The future results of Sunrun may be adversely impacted if Sunrun does not effectively manage its complex operations following the completion of the merger.

Following the completion of the merger, the size of Sunrun’s business will be significantly larger than the current size of either Vivint Solar’s business or Sunrun’s business. Sunrun’s ability to successfully manage this expanded business will depend, in part, upon management’s ability to design and implement strategic initiatives that address not only the integration of Sunrun and Vivint Solar, but also the increased scale and scope of the combined business with its associated increased costs and complexity. There can be no assurances that Sunrun will be successful in integrating the businesses or that it will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the merger.

Sunrun expects to incur substantial expenses related to the completion of the merger and the integration of Vivint Solar into Sunrun.

Sunrun is expected to incur substantial expenses in connection with the completion of the merger and the integration of a large number of processes, policies, procedures, operations, technologies and systems of Vivint Solar into Sunrun in connection with the merger. The substantial majority of these costs will be non-recurring expenses related to the merger and facilities and systems consolidation costs. Sunrun may incur additional costs or suffer loss of business under third-party contracts that are terminated or that contain change in control or other provisions that may be triggered by the completion of the merger, and/or losses of customers, and may also incur costs to retain certain key management personnel and employees. Sunrun will also incur transaction fees and costs related to formulating integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs and time delays. These incremental transaction-related costs may exceed the savings Sunrun expects to achieve from the elimination of duplicative costs and the realization of other efficiencies related to the integration of the businesses, particularly in the near term and in the event there are material unanticipated costs. Factors beyond Sunrun’s and Vivint Solar’s control could affect the total amount or timing of these expenses, many of which, by their nature, are difficult to estimate accurately.

The market price of Sunrun common stock after the merger is completed may be affected by factors different from those affecting the price of Sunrun common stock or Vivint Solar common stock before the merger is completed.

Upon completion of the merger, holders of Vivint Solar common stock will become holders of Sunrun common stock. As the businesses of Sunrun and Vivint Solar are different, the results of operations as well as the price of Sunrun common stock after the merger may, in the future, be affected by factors different from those factors affecting each of Sunrun and Vivint Solar as an independent stand-alone company. Sunrun will face additional risks and uncertainties to which each of Sunrun and Vivint Solar may currently not be exposed. As a result, the market price of Sunrun’s shares may fluctuate significantly following completion of the merger. For a discussion of Sunrun’s businesses and Vivint Solar’s businesses and of some important factors to consider in connection with those businesses, see the documents incorporated by reference into this joint proxy statement/prospectus and referred to under the section “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus.

 

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The market price of Sunrun common stock may decline as a result of the merger, including as a result of some Sunrun stockholders and/or Vivint Solar stockholders adjusting their portfolios.

The market price of Sunrun common stock may decline as a result of the merger if, among other things, the operational cost savings estimates in connection with the integration of Sunrun’s and Vivint Solar’s businesses are not realized, there are unanticipated negative impacts on Sunrun’s financial position, or if the transaction costs related to the merger are greater than expected. The market price may also decline if Sunrun does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the transactions on Sunrun’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.

In addition, sales of Sunrun common stock after the completion of the merger may cause the market price of such common stock to decrease. It is estimated that Sunrun will issue up to approximately 85,489,468 shares of Sunrun common stock in connection with the merger, based on the number of outstanding shares, including shares to be issued under Vivint Solar’s equity awards, of Vivint Solar common stock as of August 31, 2020. Vivint Solar stockholders may decide not to hold the shares of Sunrun common stock they will receive in the merger. Certain Vivint Solar stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of Sunrun common stock that they receive in the merger. Sunrun stockholders may decide not to continue to hold their shares of Sunrun common stock following completion of the merger. Certain Sunrun stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell their shares of common stock following completion of the merger. Such sales of Sunrun common stock could have the effect of depressing the market price for Sunrun common stock.

Any of these events may make it more difficult for Sunrun to sell equity or equity-related securities, dilute stockholders’ ownership interest in Sunrun and have an adverse impact on the price of Sunrun common stock.

Sunrun’s and Vivint Solar’s operations require substantial ongoing capital, and if financing is not available to Sunrun on acceptable terms, if and when needed, its operations, growth and prospects could be negatively affected.

Sunrun’s and Vivint Solar’s respective businesses are capital intensive. Following the merger, Sunrun is expected to incur significant costs on an ongoing basis to continue its operations, expand its markets, and to pay any significant unplanned or accelerated expenses or for new significant strategic investments. For example, Sunrun may need or seek to raise capital from third-party fund investors and lenders. If it is unable to do so when needed, or on desirable terms, it may be unable to finance the deployment of new solar energy systems, or its cost of capital could increase and its liquidity may be constrained, any of which could have a material adverse effect on Sunrun’s business, financial condition and results of operations.

Each of Sunrun and Vivint Solar may also need or want to raise additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes in connection with the merger. Sunrun’s or Vivint Solar’s ability to raise capital from third-party fund investors and lenders to fund its operations and growth, or to refinance its existing indebtedness, will depend on, among other factors, Sunrun’s or Vivint Solar’s financial position and performance, as well as prevailing market conditions and other factors beyond Sunrun’s and Vivint Solar’s control, such as any decisions by credit ratings agencies with respect to credit ratings that they may maintain with respect to Sunrun or Vivint Solar. Any concerns regarding Sunrun’s or Vivint Solar’s business and liquidity, uncertainty regarding the timing and completion of the merger and the capital structure of Vivint Solar and Sunrun following the merger and general market conditions could negatively impact Sunrun’s and Vivint Solar’s ability to access the capital markets or to raise funds on acceptable terms, or at all.

 

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Sunrun’s ability to use Sunrun’s and Vivint Solar’s net operating loss and tax credit carryforwards to offset future taxable income may be subject to limitation, which could result in higher tax liabilities.

As of December 31, 2019, Sunrun had U.S. federal and state net operating loss carryforwards, or NOLs, of approximately $0.7 billion and $1.3 billion, respectively, which begin expiring in varying amounts in 2028 and 2024, respectively, if unused. Sunrun’s U.S. federal and certain state NOLs generated in tax years beginning after December 31, 2017 total approximately $0.5 billion and $0.1 billion, respectively, have indefinite carryover periods, and do not expire. As of December 31, 2019, Vivint Solar had U.S. federal and state NOLs of $8.1 million and $230.9 million, respectively. Vivint Solar’s U.S. federal NOLs do not expire and Vivint Solar’s state NOLs expire in varying amounts from 2029 through 2039, if unused. Vivint Solar also may carry NOLs back to earlier tax years under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”). Additionally, as of December 31, 2019, Sunrun and Vivint Solar have approximately $18.8 million and $48.5 million of investment tax credits, respectively, which begin expiring in varying amounts in 2028 and 2036, respectively, if unused. These NOLs and other tax carryforwards have changed during fiscal year 2020, though the precise extent of the change will not be known until the companies file their income tax returns for 2020.

Sunrun’s ability to utilize its and Vivint Solar’s NOLs and tax credit carryforwards to offset future taxable income may be limited due to certain ownership change limitations under Section 382 and 383 of the Code, and similar state provisions. Sunrun has not yet completed its analysis to determine whether its or Vivint Solar’s tax assets will be limited by Section 382 and 383. Based on the preliminary analysis, it is anticipated that both Sunrun and Vivint Solar may undergo an ownership change. Additionally, states may impose other limitations on the use of state NOLs and tax credit carryforwards. For example, California has recently suspended the use of NOLs and limited the use of certain tax credits for taxable years beginning in 2020 through 2022. Any of these limitations may result in the expiration of Sunrun’s or Vivint Solar’s NOLs or other tax assets before utilization.

Other Risks Relating to Sunrun and Vivint Solar

Sunrun’s and Vivint Solar’s businesses are and will be subject to the risks described above. In addition, Sunrun and Vivint Solar are, and will continue to be, subject to the risks described in, as applicable, the Sunrun Annual Report on Form 10-K for the year ended December 31, 2019, and the Vivint Solar Annual Report on Form 10-K for the year ended December 31, 2019, as updated or supplemented by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. See the section “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus for the location of information incorporated by reference into this joint proxy statement/prospectus.

 

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THE SUNRUN VIRTUAL SPECIAL MEETING

This joint proxy statement/prospectus is being provided to Sunrun stockholders as part of a solicitation of proxies by the Sunrun Board for use at the Sunrun virtual special meeting to be held at the time and place specified below and at any properly convened meeting following an adjournment or postponement thereof. This joint proxy statement/prospectus provides Sunrun stockholders with information they need to know to be able to vote or instruct their vote to be cast at the Sunrun virtual special meeting.

Date, Time and Place of the Virtual Special Meeting

The Sunrun virtual special meeting will be held exclusively online via live audio-only webcast on October 1, 2020 at 8:00 am Pacific Time. The Sunrun virtual special meeting can be accessed by visiting http://virtualshareholdermeeting.com/Sunrun2020SM, where you will be able to vote your shares and submit questions during the Sunrun virtual special meeting webcast by logging in to the website listed above using the 16-digit control number included in your proxy card. Online check-in will begin at 7:50 am Pacific Time, and we encourage you to allow ample time for the online check-in procedures. Sunrun intends to mail this joint proxy statement/prospectus and the enclosed form of proxy to its stockholders entitled to vote at the Sunrun virtual special meeting on or about September 2, 2020.

Matters to be Considered

At the Sunrun virtual special meeting, Sunrun stockholders will be asked to consider and vote on the following:

 

  1.

Approval of the Sunrun Share Issuance. To vote on a proposal to approve the issuance of Sunrun common stock, par value $0.0001 per share, to Vivint Solar stockholders in connection with the merger contemplated by the merger agreement; and

 

  2.

Adjournment of the Sunrun Virtual Special Meeting. To vote on a proposal to approve the adjournment of the Sunrun virtual special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Sunrun virtual special meeting to approve the Sunrun share issuance proposal.

Completion of the merger is conditioned on the approval of the Sunrun share issuance proposal.

Recommendation of the Sunrun Board

On July 6, 2020, the Sunrun Board unanimously approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement, including the merger, and determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger and the Sunrun share issuance, are advisable and fair to and in the best interests of Sunrun and its stockholders. Accordingly, the Sunrun Board unanimously recommends that Sunrun stockholders vote “FOR” the Sunrun share issuance proposal and “FOR” the Sunrun adjournment proposal.

Sunrun stockholders should carefully read this joint proxy statement/prospectus, including any documents incorporated by reference, and the annexes in their entirety for more detailed information concerning the merger and the other transactions contemplated by the merger agreement.

Sunrun Record Date; Sunrun Stockholders Entitled to Vote

Only holders of record of Sunrun common stock at the close of business on the Sunrun record date will be entitled to notice of, and to vote at, the Sunrun virtual special meeting or any adjournments or postponements thereof.

 

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As of the close of business on the Sunrun record date, there were 126,894,221 shares of Sunrun common stock outstanding and entitled to vote at the Sunrun virtual special meeting. Each share of Sunrun common stock outstanding on the Sunrun record date entitles the holder thereof to one vote on each proposal to be considered at the Sunrun virtual special meeting.

Your vote is important. We expect that many Sunrun stockholders will not attend the Sunrun virtual special meeting, and instead will be represented by proxy. Most Sunrun stockholders have a choice of submitting a proxy to vote their shares via the Internet, by using a toll-free telephone number, or by returning a completed Sunrun proxy card or voting instruction form. Please check your notice, proxy card or the information forwarded by your broker, bank or other holder of record, including by a Sunrun employee savings plan, to see which options are available to you. These Internet and telephone procedures have been designed to authenticate Sunrun stockholders, to allow you to vote your shares, and to confirm that your instructions have been properly recorded. The Internet and telephone facilities for Sunrun stockholders of record to submit proxies will close at 11:59 pm Eastern Time on September 30, 2020. If your shares are held through a broker, bank or other holder of record, including by a Sunrun employee savings plan, and Internet or telephone facilities are made available to you, these facilities may close sooner than those for Sunrun stockholders of record.

You can revoke your proxy at any time before it is exercised by delivering a properly executed, later-dated proxy (including a proxy submitted by Internet or telephone), by delivering a written revocation before the Sunrun virtual special meeting or by voting at the Sunrun virtual special meeting. Executing your proxy in advance will not limit your right to vote at the Sunrun virtual special meeting if you decide to attend the Sunrun virtual special meeting. However, if your shares are held in the name of a broker, bank or other holder of record, you cannot vote at the Sunrun virtual special meeting unless you have a legal proxy, executed in your favor, from the holder of record.

All shares entitled to vote and represented by properly executed proxies received prior to the Sunrun virtual special meeting and not revoked will be voted at the Sunrun virtual special meeting in accordance with your instructions. If you sign and return your proxy but do not indicate how your shares should be voted on a proposal, the shares represented by your proxy will be voted as the Sunrun Board recommends for such proposal.

Subject to health concerns relating to COVID-19, which may require Sunrun to implement alternative procedures to protect the health and welfare of Sunrun’s employees and stockholders, a complete list of Sunrun stockholders entitled to vote at the Sunrun virtual special meeting will be available for examination by any Sunrun stockholder in the Corporate Secretary’s Office at Sunrun Inc., 225 Bush Street, Suite 1400, San Francisco, California 94104, for purposes pertaining to the Sunrun virtual special meeting, during ordinary business hours for a period of ten days before the Sunrun virtual special meeting, and at the Sunrun virtual special meeting. A complete list of Sunrun stockholders entitled to vote at the Sunrun virtual special meeting will also be available for inspection during the Sunrun virtual special meeting at http://virtualshareholdermeeting.com/Sunrun2020SM by logging in with your 16-digit control number(s).

Voting by Sunrun’s Directors and Executive Officers

As of the close of business on the Sunrun record date, directors and executive officers of Sunrun and their affiliates owned and were entitled to vote 5,103,930 shares of Sunrun common stock, or approximately 4.0% of the shares of common stock outstanding on that date. It is currently expected that Sunrun’s directors and executive officers will vote their shares of Sunrun common stock in favor of each of the proposals to be considered at the Sunrun virtual special meeting although none of such directors or executive officers have entered into an agreement obligating them to do so. For information with respect to Sunrun common stock owned by directors and executive officers of Sunrun, please see Sunrun’s definitive proxy statement on Schedule 14A, filed with the SEC on April 17, 2020 and incorporated by reference into this joint proxy statement/prospectus.

The number of shares reflected above does not include shares underlying outstanding Sunrun stock options or Sunrun restricted stock unit awards.

 

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Quorum

The presence at the Sunrun virtual special meeting, virtually or represented by proxy, of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote as of the Sunrun record date, will constitute a quorum for the transaction of business at the Sunrun virtual special meeting.

Abstentions will count for the purpose of determining the presence of a quorum for the transaction of business at the Sunrun virtual special meeting.

Required Vote

The required votes to approve the Sunrun proposals are as follows:

 

   

The Sunrun share issuance proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of Sunrun common stock, present or represented by proxy at the Sunrun virtual special meeting, and entitled to vote on the Sunrun share issuance proposal. The required vote of holders of Sunrun common stock to approve the Sunrun share issuance proposal is based on the number of shares that are present virtually or represented by proxy at the Sunrun virtual special meeting and entitled to vote on the proposal, not on the number of outstanding shares of Sunrun common stock. Brokers, banks and other nominees do not have discretionary authority to vote on this proposal.

 

   

The Sunrun adjournment proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of Sunrun common stock, present or represented by proxy at the Sunrun virtual special meeting, and entitled to vote on the Sunrun adjournment proposal. The required vote of holders of Sunrun common stock to approve the Sunrun adjournment proposal is based on the number of shares that are present virtually or represented by proxy at the Sunrun virtual special meeting and entitled to vote on the proposal, not on the number of outstanding shares of Sunrun common stock. Brokers, banks and other nominees do not have discretionary authority to vote on this proposal.

Voting by Holders of Record

If you were the record holder of your shares of Sunrun common stock as of the Sunrun record date, you may vote your shares of Sunrun common stock at the Sunrun virtual special meeting via the virtual meeting website. Any Sunrun stockholder can attend the Sunrun virtual special meeting by visiting http://virtualshareholdermeeting.com/Sunrun2020SM, where stockholders may vote and submit questions during the Sunrun virtual special meeting webcast. Additionally, you may submit your proxy authorizing the voting of your shares of Sunrun common stock at the Sunrun virtual special meeting by mail, by telephone or via the Internet.

Voting via Proxies Submitted by the Internet or by Telephone

 

   

To submit your proxy via the Internet, go to www.proxyvote.com. Have your Sunrun proxy card in hand when you access the website and follow the instructions to vote your shares.

 

   

To submit your proxy by telephone, call (800) 690-6903. Have your Sunrun proxy card in hand when you call and then follow the instructions to vote your shares.

 

   

If you submit a proxy to vote your shares via the Internet or by telephone, you must do so no later than 11:59 pm Eastern Time on September 30, 2020.

Voting via Proxies Submitted by Mail

As an alternative to submitting your proxy via the Internet or by telephone, you may submit your proxy by mail.

 

   

To submit your proxy by mail, simply mark, sign and date your Sunrun proxy card and return it in the pre-paid envelope that has been provided, or in an envelope addressed to: Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood NY 11717.

 

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If you submit a proxy to vote your shares by mail, your Sunrun proxy card must be received no later than 11:59 pm Eastern Time on September 30, 2020.

Treatment of Abstentions; Failure to Vote

For purposes of the Sunrun virtual special meeting, an abstention occurs when a Sunrun stockholder attends the Sunrun virtual special meeting, either by attending the Sunrun virtual special meeting or by proxy, but abstains from voting. For each of the Sunrun share issuance proposal and the Sunrun adjournment proposal, if a Sunrun stockholder present at the Sunrun virtual special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the same effect as a vote cast “AGAINST” such proposal. If a Sunrun stockholder is not present at the Sunrun virtual special meeting and does not respond by proxy, it will have no effect on the vote count for such proposal. Sunrun does not intend to call a vote on the Sunrun adjournment proposal if the Sunrun share issuance proposal has been approved at the Sunrun virtual special meeting.

Shares Held in Street Name / Broker Non-Votes

If your shares of Sunrun common stock are held in an account at a bank, broker or other nominee holder of record (i.e., in “street name”), you must provide the record holder of your shares with instructions on how to vote the shares. Please follow the voting instructions provided by the bank, broker or other nominee. You may not vote shares held in street name by returning a Sunrun proxy card directly to Sunrun or by voting at the Sunrun virtual special meeting unless you provide a “legal proxy”, which you must obtain from your bank, broker or other nominee. Further, banks, brokers or other nominees who hold shares of Sunrun common stock on behalf of their customers may not give a proxy to Sunrun to vote those shares with respect to the Sunrun share issuance proposal and the Sunrun adjournment proposal without specific instructions from their customers, as banks, brokers and other nominees do not have discretionary voting power on these “non-routine” matters. Under the current rules of Nasdaq, each of the proposals to be considered at the Sunrun virtual special meeting as described in this joint proxy statement/prospectus are considered non-routine. Therefore banks, brokers and other nominee holders of record do not have discretionary authority to vote on any of the proposals to be considered at the Sunrun virtual special meeting. Broker non-votes occur when a broker or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the broker does not have discretionary voting power. If a beneficial owner of shares of Sunrun common stock held in street name does not give voting instructions to the broker, bank or other nominee, then those shares will not be present or represented by proxy at the Sunrun virtual special meeting. As a result, broker non-votes would not have any effect on the outcome of the Sunrun share issuance proposal or Sunrun adjournment proposal.

Attendance at the Sunrun Virtual Special Meeting and Voting at the Sunrun Virtual Special Meeting

You or your authorized proxy may attend the Sunrun virtual special meeting if you were a registered or beneficial stockholder of Sunrun common stock as of the Sunrun record date.

To participate in the Sunrun virtual special meeting, visit http://virtualshareholdermeeting.com/Sunrun2020SM and enter the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. If you wish to submit a question during the Sunrun virtual special meeting, log into the virtual meeting platform at http://virtualshareholdermeeting.com/Sunrun2020SM, type your question into the “Ask a Question” field, and click “Submit.” We will respond to as many properly submitted questions during the relevant portion of the Sunrun virtual special meeting agenda as time allows.

If we experience technical difficulties during the Sunrun virtual special meeting (e.g., a temporary or prolonged power outage), we will determine whether the Sunrun virtual special meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the Sunrun virtual special meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, we will promptly notify stockholders of the decision via http://virtualshareholdermeeting.com/Sunrun2020SM. We will have technicians

 

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ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting website log-in page at http://virtualshareholdermeeting.com/Sunrun2020SM.

You should register in advance to attend the Sunrun virtual special meeting. To do so, please make your request by mail to Office of the Corporate Secretary, 225 Bush Street, Suite 1400, San Francisco, California 94104, email at legalnotices@sunrun.com or by phone at (415) 580-6900. You are encouraged to timely make any such request such that Sunrun’s Corporate Secretary receives your request for an admission ticket on or before September 24, 2020.

If you own shares in street name through an account with a bank, broker or other nominee, please send proof of your Sunrun share ownership as of the Sunrun record date (for example, a brokerage firm account statement or a “legal proxy” from your intermediary) along with your registration request. If you are not sure what proof to send, check with your intermediary.

If your shares are registered in your name with Sunrun’s stock registrar and transfer agent, AST, no proof of ownership is necessary because Sunrun can verify your ownership.

Revocability of Proxies

Any Sunrun stockholder of record giving a proxy has the power to revoke it. If you are a Sunrun stockholder of record, you may revoke your proxy in any of the following ways:

 

   

By delivering to Sunrun’s Corporate Secretary (at Sunrun’s executive offices at 225 Bush Street, Suite 1400, San Francisco, California 94104) a signed written notice of revocation bearing a later date than the proxy, stating that the proxy is revoked, which revocation is received prior to the proxy’s exercise at the Sunrun virtual special meeting;

 

   

By duly executing a subsequently dated proxy relating to the same shares of Sunrun common stock and delivering it to Sunrun’s Corporate Secretary at the address in the bullet point above, which subsequent proxy is received before the prior proxy is exercised at the Sunrun virtual special meeting;

 

   

By duly submitting a subsequently dated proxy relating to the same shares of Sunrun common stock by telephone or via the Internet (i.e., your most recent duly submitted voting instructions will be followed) before 11:59 pm Eastern Time on September 30, 2020; or

 

   

By attending the Sunrun virtual special meeting and voting such shares during the Sunrun virtual special meeting as described above, although attendance at the Sunrun virtual special meeting will not, by itself, revoke a proxy.

If your shares are held by a bank, broker or other nominee, you may change your vote by submitting new voting instructions to your bank, broker or other nominee, or applicable plan administrator. You must contact your bank, broker or other nominee, or applicable plan administrator to find out how to do so.

Solicitation of Proxies; Expenses of Solicitation

The Sunrun Board is soliciting proxies for the Sunrun virtual special meeting from its stockholders. Sunrun will bear a portion of the cost of the solicitation of proxies, including preparation, assembly and delivery, as applicable, of this joint proxy statement/prospectus, the Sunrun proxy card and any additional materials furnished to Sunrun stockholders. Proxies may be solicited by directors, officers and a small number of Sunrun’s regular employees by mail, email, in person and by telephone, but such persons will not receive any additional compensation for these activities. Sunrun has retained MacKenzie, a proxy solicitation firm, to assist in the solicitation of proxies for a fee of approximately $15,000 plus reasonable out-of-pocket costs and expenses. As

 

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appropriate, copies of solicitation material will be furnished to brokerage houses, fiduciaries and custodians that hold shares of Sunrun common stock of record for beneficial owners for forwarding to such beneficial owners. Sunrun may also reimburse persons representing beneficial owners for their costs of forwarding the solicitation material to such owners.

Tabulation of Votes

Sunrun has appointed Broadridge to serve as the Inspector of Election for the Sunrun virtual special meeting. Broadridge will independently tabulate affirmative and negative votes and abstentions.

Adjournments

Subject to certain restrictions contained in the merger agreement, the Sunrun virtual special meeting may be adjourned to allow additional time for obtaining additional proxies. No notice of an adjourned meeting need be given if the time and place thereof are announced at the Sunrun virtual special meeting at which the adjournment was taken unless:

 

   

the adjournment is for more than 30 days, in which case a notice of the adjourned meeting will be given to each Sunrun stockholder of record entitled to vote at the Sunrun virtual special meeting; or

 

   

if, after the adjournment, a new record date for determination of Sunrun stockholders entitled to vote is fixed for the adjourned meeting, in which case the Sunrun Board will fix as the record date for determining Sunrun stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of Sunrun stockholders entitled to vote at the adjourned meeting, and will give notice of the adjourned meeting to each Sunrun stockholder of record as of such record date.

At any adjourned meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the Sunrun virtual special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting.

Assistance and Additional Information

If you need assistance with submitting a proxy to vote your shares via the Internet, by telephone or by completing your Sunrun proxy card, or have questions regarding the Sunrun virtual special meeting, please contact MacKenzie, the proxy solicitor for Sunrun at (800) 322-2885 (toll-free for stockholders), (212) 929-5500 (collect for banks and brokers) or proxy@mackenziepartners.com.

Your vote is very important regardless of the number of shares of Sunrun common stock that you own and the matters to be considered at the Sunrun virtual special meeting are of great importance to the stockholders of Sunrun. Accordingly, you are urged to read and carefully consider the information contained in or incorporated by reference into this joint proxy statement/prospectus and promptly submit your proxy via the Internet or by telephone or complete, date, sign and promptly return the enclosed Sunrun proxy card or voting instruction form in the enclosed postage-paid envelope. If you submit your proxy via the Internet or by telephone, you do not need to return the enclosed Sunrun proxy card.

Please vote your shares via the Internet or by telephone, or sign, date and return a Sunrun proxy card or voting instruction form promptly to ensure that your shares can be represented, even if you otherwise plan to attend the Sunrun virtual special meeting.

 

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SUNRUN PROPOSALS

Sunrun Proposal 1: Approval of the Sunrun Share Issuance

As discussed elsewhere in this joint proxy statement/prospectus, Sunrun stockholders are considering and voting to approve the issuance of shares of Sunrun common stock in connection with the merger of Merger Sub with and into Vivint Solar as contemplated by the merger agreement. Sunrun stockholders should read carefully this joint proxy statement/prospectus in its entirety for more detailed information concerning the merger agreement and the merger. In particular, Sunrun stockholders are directed to the merger agreement which is attached as Annex A to this joint proxy statement/prospectus.

Pursuant to the merger agreement, approval of the Sunrun share issuance proposal is a condition to the consummation of the merger. If the Sunrun share issuance proposal is not approved, the merger will not be completed.

Approval of the Sunrun share issuance proposal requires that the number of votes cast for this proposal exceeds the sum of the number of votes cast against this proposal and the number of votes that abstain from voting on this proposal at the meeting, assuming a quorum is present.

The Sunrun Board recommends that you vote “FOR” the Sunrun share issuance proposal.

Sunrun Proposal 2: Adjournment of the Sunrun Virtual Special Meeting

The Sunrun virtual special meeting may be adjourned to another time and place to permit further solicitation of proxies, if necessary or appropriate, to obtain additional proxies if there are not sufficient votes to approve the Sunrun share issuance proposal.

Sunrun is asking you to authorize the holder of any proxy solicited by the Sunrun Board to vote in favor of any adjournment of the Sunrun virtual special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the Sunrun share issuance proposal. Sunrun does not intend to call a vote on the Sunrun adjournment proposal if the Sunrun share issuance proposal considered at the Sunrun virtual special meeting has been approved at the Sunrun virtual special meeting.

Approval of the Sunrun adjournment proposal requires that the number of votes cast for this proposal exceeds the sum of the number of votes cast against this proposal and the number of votes that abstain from voting on this proposal at the meeting, assuming a quorum is present. If the Sunrun virtual special meeting is adjourned for the purpose of soliciting additional proxies, Sunrun stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use.

Sunrun does not intend to call a vote on the Sunrun adjournment proposal if the Sunrun share issuance proposal considered at the Sunrun virtual special meeting has been approved at the Sunrun virtual special meeting. The Sunrun adjournment proposal relates only to an adjournment of the Sunrun virtual special meeting for purposes of soliciting additional votes for approval of the Sunrun share issuance proposal. Sunrun retains full authority to the extent set forth in the Sunrun bylaws and Delaware law to adjourn the Sunrun virtual special meeting for any other purpose, or to postpone the Sunrun virtual special meeting before it is convened, without the consent of any Sunrun stockholder.

The Sunrun Board recommends that you vote “FOR” the Sunrun adjournment proposal.

 

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THE VIVINT SOLAR VIRTUAL SPECIAL MEETING

This joint proxy statement/prospectus is being provided to the Vivint Solar stockholders as part of a solicitation of proxies by the Vivint Solar Board for use at the Vivint Solar virtual special meeting to be held at the time and place specified below and at any properly convened meeting following an adjournment or postponement thereof. This joint proxy statement/prospectus provides Vivint Solar stockholders with information they need to know to be able to vote or instruct their vote to be cast at the Vivint Solar virtual special meeting.

Date, Time and Place of the Virtual Special Meeting

The Vivint Solar virtual special meeting will be held exclusively online via live audio-only webcast on October 1, 2020 at 9:00 am Mountain Time. The Vivint Solar virtual special meeting can be accessed by visiting https://www.vivintsolar.com/2020specialmeeting, where you will be able to listen to the Vivint Solar virtual special meeting live, have an opportunity to submit questions, and vote online. We encourage you to allow ample time for online check-in, which will open at 8:50 am, Mountain Time. Please note that you will not be able to attend the special meeting in person. Vivint Solar intends to mail this joint proxy statement/prospectus and the enclosed form of proxy to its stockholders entitled to vote at the Vivint Solar virtual special meeting on or about September 2, 2020.

Matters to be Considered

At the Vivint Solar virtual special meeting, Vivint Solar stockholders will be asked to consider and vote on the following:

 

  1.

Adoption of the Merger Agreement. To vote on a proposal to adopt the merger agreement, which is further described in this joint proxy statement/prospectus, including in the section entitled “The Merger Agreement” beginning on page 154 of this joint proxy statement/prospectus, and a copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus;

 

  2.

Vivint Solar Merger-Related Compensation. To vote on a proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid by Vivint Solar to certain of its named executive officers that is based on or otherwise relates to the merger contemplated by the merger agreement; and

 

  3.

Adjournment of the Vivint Solar Virtual Special Meeting. To vote on a proposal to approve the adjournment of the Vivint Solar virtual special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Vivint Solar virtual special meeting to approve the Vivint Solar merger proposal.

Completion of the merger is conditioned on the approval of the Vivint Solar merger proposal.

Recommendation of the Vivint Solar Board

On July 6, 2020, the Vivint Solar Board unanimously approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement, including the merger, and determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable, fair to and in the best interests of Vivint Solar and its stockholders. Accordingly, the Vivint Solar Board unanimously recommends that Vivint Solar stockholders vote “FOR” the Vivint Solar merger proposal, “FOR” the Vivint Solar merger-related compensation proposal and “FOR” the Vivint Solar adjournment proposal.

Vivint Solar stockholders should carefully read this joint proxy statement/prospectus, including any documents incorporated by reference, and the annexes in their entirety for more detailed information concerning the merger and the other transactions contemplated by the merger agreement.

 

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Vivint Solar Record Date; Vivint Solar Stockholders Entitled to Vote

Only holders of record of Vivint Solar common stock at the close of business on August 31, 2020 will be entitled to notice of, and to vote at, the Vivint Solar virtual special meeting or any adjournments or postponements thereof.

As of the close of business on the Vivint Solar record date, there were 125,866,872 shares of Vivint Solar common stock outstanding and entitled to vote at the Vivint Solar virtual special meeting. Each share of Vivint Solar common stock outstanding on the Vivint Solar record date entitles the holder thereof to one vote on each proposal to be considered at the Vivint Solar virtual special meeting.

Your vote is important. We expect that many Vivint Solar stockholders will not attend the Vivint Solar virtual special meeting, and instead will be represented by proxy. Most Vivint Solar stockholders have a choice of submitting a proxy to vote their shares via the Internet, by using a toll-free telephone number, or by returning a completed Vivint Solar proxy card or voting instruction form. Please check your notice, proxy card or the information forwarded by your broker, bank or other holder of record to see which options are available to you. These Internet and telephone procedures have been designed to authenticate Vivint Solar stockholders, to allow you to vote your shares, and to confirm that your instructions have been properly recorded. The Internet and telephone facilities for Vivint Solar stockholders of record to submit their proxies will close at 11:59 pm Eastern Time on September 30, 2020. If your shares are held through a broker, bank or other holder of record and Internet or telephone facilities are made available to you, these facilities may close sooner than those for Vivint Solar stockholders of record.

You can revoke your proxy at any time before it is exercised by delivering a properly executed, later-dated proxy (including a proxy submitted by Internet or telephone), by delivering a written revocation before the Vivint Solar virtual special meeting or by voting at the Vivint Solar virtual special meeting. Executing your proxy in advance will not limit your right to vote at the Vivint Solar virtual special meeting if you decide to attend the Vivint Solar virtual special meeting. However, if your shares are held in the name of a broker, bank or other holder of record, you cannot vote at the Vivint Solar virtual special meeting unless you have a legal proxy, executed in your favor, from the holder of record.

All shares entitled to vote and represented by properly executed proxies received prior to the Vivint Solar virtual special meeting and not revoked will be voted at the Vivint Solar virtual special meeting in accordance with your instructions. If you sign and return your proxy but do not indicate how your shares should be voted on a proposal, the shares represented by your proxy will be voted as the Vivint Solar Board recommends for such proposal.

Subject to health concerns relating to COVID-19 which may require Vivint Solar to implement alternative procedures to protect the health and welfare of Vivint Solar’s employees and stockholders, a complete list of Vivint Solar stockholders entitled to vote at the Vivint Solar virtual special meeting will be available for examination by any Vivint Solar stockholder at Vivint Solar’s principal executive offices located at 1800 West Ashton Boulevard, Lehi, Utah 84043, for purposes pertaining to the Vivint Solar virtual special meeting, during ordinary business hours for a period of ten days before the Vivint Solar virtual special meeting. If you would like to examine the stockholder list, please contact Vivint Solar’s Investor Relations department at 855-842-1844 or ir@vivintsolar.com to schedule an appointment or make alternate arrangements. A complete list of Vivint Solar stockholders entitled to vote at the Vivint Solar virtual special meeting will also be available for inspection during the Vivint Solar virtual special meeting through the virtual meeting website.

Voting by Vivint Solar’s Directors and Executive Officers

As of the close of business on the Vivint Solar record date, directors and executive officers of Vivint Solar and their affiliates owned and were entitled to vote 621,641 shares of Vivint Solar common stock or approximately 0.5% of the shares of Vivint Solar common stock outstanding on that date. It is currently expected that Vivint Solar’s directors and executive officers will vote their shares of Vivint Solar common stock in favor

 

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of each of the proposals to be considered at the Vivint Solar virtual special meeting, although none of such directors or executive officers have entered into an agreement obligating them to do so. For information with respect to Vivint Solar common stock owned by directors and executive officers of Vivint Solar, please see Vivint Solar’s definitive proxy statement on Schedule 14A, filed with the SEC on April 24, 2020 and incorporated by reference into this joint proxy statement/prospectus.

The number of shares reflected above does not include shares underlying outstanding Vivint Solar stock options, Vivint Solar PSU awards, Vivint Solar RSU awards or Vivint Solar LTIP Awards. For information with respect to Vivint Solar stock options and Vivint Solar RSU awards, please see the section entitled “The Merger Agreement—Treatment of Vivint Solar Equity Awards” beginning on page 155 of this joint proxy statement/prospectus.

Quorum

The presence at the Vivint Solar virtual special meeting, virtually or represented by proxy, of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote thereat as of the Vivint Solar record date, will constitute a quorum for the transaction of business at the Vivint Solar virtual special meeting.

Abstentions will count for the purpose of determining the presence of a quorum for the transaction of business at the Vivint Solar virtual special meeting.

Required Vote

The required votes to approve the Vivint Solar proposals are as follows:

 

   

The Vivint Solar merger proposal requires the affirmative vote of the holders of a majority of the shares of Vivint Solar common stock outstanding as of the close of business on the Vivint Solar record date and entitled to vote on the Vivint Solar merger proposal. The required vote of Vivint Solar stockholders on the Vivint Solar merger proposal is based upon the number of outstanding shares of Vivint Solar common stock entitled to vote thereon and not the number of shares that are actually voted. Brokers, banks and other nominees do not have discretionary authority to vote on this proposal.

 

   

The Vivint Solar merger-related compensation proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of Vivint Solar common stock, present or represented by proxy at the Vivint Solar virtual special meeting and entitled to vote on the Vivint Solar merger-related compensation proposal. The required vote of holders of Vivint Solar common stock to approve the Vivint Solar merger-related compensation proposal is based on the number of shares that are present virtually or represented by proxy at the Vivint Solar virtual special meeting and entitled to vote on the proposal, not on the number of outstanding shares of Vivint Solar common stock. Brokers, banks and other nominees do not have discretionary authority to vote on this proposal. Because the vote on the Vivint Solar merger-related compensation proposal is advisory only, it will not be binding on either Vivint Solar or Sunrun. Accordingly, if the Vivint Solar merger proposal is approved and the merger is completed, the Vivint Solar merger-related compensation will be payable to Vivint Solar’s named executive officers, subject only to the conditions applicable thereto, regardless of the outcome of the approval of the Vivint Solar merger-related compensation proposal.

 

   

The Vivint Solar adjournment proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of Vivint Solar common stock, present or represented by proxy at the Vivint Solar virtual special meeting and entitled to vote on the Vivint Solar adjournment proposal. The required vote of holders of Vivint Solar common stock to approve the Vivint Solar adjournment proposal is based on the number of shares that are present virtually or represented by proxy at the Vivint Solar virtual special meeting and entitled to vote on the proposal, not on the number of outstanding shares of Vivint Solar common stock. Brokers, banks and other nominees do not have discretionary authority to vote on this proposal.

 

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Voting by Holders of Record

If you were the record holder of your shares of Vivint Solar common stock as of the Vivint Solar record date, you may vote your shares of Vivint Solar common stock at the Vivint Solar virtual special meeting via the virtual meeting website. Any Vivint Solar stockholder can attend the Vivint Solar virtual special meeting by visiting https://www.vivintsolar.com/2020specialmeeting, where stockholders may vote and submit questions during the Vivint Solar virtual special meeting. Additionally, you may submit your proxy authorizing the voting of your shares of Vivint Solar common stock at the Vivint Solar virtual special meeting by mail, by telephone or via the Internet.

Voting via Proxies Submitted by the Internet or by Telephone

 

   

To submit your proxy via the Internet, go to http://www.envisionreports.com/VSLR. Have your Vivint Solar proxy card in hand when you access the website and follow the instructions to vote your shares.

 

   

To submit your proxy by telephone, call 1-800-652-VOTE. Have your Vivint Solar proxy card in hand when you call and then follow the instructions to vote your shares.

 

   

If you submit a proxy to vote your shares via the Internet or by telephone, you must do so no later than 11:59 pm Eastern Time on September 30, 2020.

Voting via Proxies Submitted by Mail

As an alternative to submitting your proxy via the Internet or by telephone, you may submit your proxy by mail.

 

   

To submit your proxy by mail, simply mark your Vivint Solar proxy card, date and sign it and return it in the postage-paid envelope. If you do not have the postage-paid envelope, please mail your completed Vivint Solar proxy card to the following address:

Computershare

Vivint Solar, Inc. Legal Proxy

P.O. Box 43001

Providence, RI 02940-3001

 

   

If you submit a proxy to vote your shares by mail, your Vivint Solar proxy card must be received no later than 11:59 pm Eastern Time on September 30, 2020.

Treatment of Abstentions; Failure to Vote

For purposes of the Vivint Solar virtual special meeting, an abstention occurs when a Vivint Solar stockholder attends the Vivint Solar virtual special meeting and does not vote or returns a proxy with an “abstain” instruction.

 

   

For the Vivint Solar merger proposal, if a Vivint Solar stockholder present at the Vivint Solar virtual special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the effect of a vote cast “AGAINST” such proposal. If a Vivint Solar stockholder is not present at the Vivint Solar virtual special meeting and does not respond by proxy, it will have the effect of a vote cast “AGAINST” such proposal.

 

   

For the Vivint Solar merger-related compensation proposal, if a Vivint Solar stockholder present at the Vivint Solar virtual special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have the same effect as a vote cast “AGAINST” such proposal. If a Vivint Solar stockholder is not present at the Vivint Solar virtual special meeting and does not respond by proxy, it will have no effect on the vote count for such proposal (assuming a quorum is present).

 

   

For the Vivint Solar adjournment proposal, if a Vivint Solar stockholder present at the Vivint Solar virtual special meeting abstains from voting, or responds by proxy with an “abstain” vote, it will have

 

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the same effect as a vote cast “AGAINST” such proposal. If a Vivint Solar stockholder is not present at the Vivint Solar virtual special meeting and does not respond by proxy, it will have no effect on the vote count for such proposal. Vivint Solar does not intend to call a vote on the Vivint Solar adjournment proposal if the Vivint Solar merger proposal has been approved at the Vivint Solar virtual special meeting.

Shares Held in Street Name / Broker Non-Votes

If your shares of Vivint Solar common stock are held in an account at a bank, broker or other nominee holder of record (i.e., in “street name”), you must provide the record holder of your shares with instructions on how to vote the shares. Please follow the voting instructions provided by the bank, broker or other nominee. You may not vote shares held in street name by returning a Vivint Solar proxy card directly to Vivint Solar or by voting virtually at the Vivint Solar virtual special meeting unless you provide a “legal proxy”, which you must obtain from your bank, broker or other nominee. Further, banks, brokers or other nominees who hold shares of Vivint Solar common stock on behalf of their customers may not give a proxy to Vivint Solar to vote those shares with respect to the Vivint Solar merger proposal, the Vivint Solar merger-related compensation proposal and the Vivint Solar adjournment proposal without specific instructions from their customers, as banks, brokers and other nominees do not have discretionary voting power on these “non-routine” matters. Under the current rules of NYSE, each of the proposals to be considered at the Vivint Solar virtual special meeting as described in this joint proxy statement/prospectus are considered non-routine. Therefore banks, brokers and other nominee holders of record do not have discretionary authority to vote on any of the proposals to be considered at the Vivint Solar virtual special meeting. Broker non-votes occur when a broker or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the broker does not have discretionary voting power. If a beneficial owner of shares of Vivint Solar common stock held in street name does not give voting instructions to the broker, bank or other nominee, then those shares will not be present or represented by proxy at the Vivint Solar virtual special meeting. As a result, broker non-votes would not have any effect on the outcome of the Vivint Solar merger-related compensation proposal or the Vivint Solar adjournment proposal, but would have the same effect as a vote “AGAINST” the Vivint Solar merger proposal.

Attendance at the Vivint Solar Virtual Special Meeting

You or your authorized proxy may attend the Vivint Solar virtual special meeting if you were a registered or beneficial stockholder of Vivint Solar common stock as of the Vivint Solar record date.

To participate in the Vivint Solar virtual special meeting, visit https://www.vivintsolar.com/2020specialmeeting and enter the 15-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. The password for the meeting is VSLR2020. If you wish to submit a question during the Vivint Solar virtual special meeting, log into the virtual meeting platform at https://www.vivintsolar.com/2020specialmeeting, click the message icon at the top of the screen, and submit your question. We will respond to as many properly submitted questions during the relevant portion of the Vivint Solar virtual special meeting agenda as time allows.

If we experience technical difficulties during the Vivint Solar virtual special meeting (e.g., a temporary or prolonged power outage), we will determine whether the Vivint Solar virtual special meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the Vivint Solar virtual special meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, we will promptly notify stockholders of the decision via https://www.vivintsolar.com/2020specialmeeting.

If you are a registered stockholder (that is, you hold your shares through Vivint Solar’s transfer agent, Computershare), you do not need to register to attend the Vivint Solar virtual special meeting virtually on the Internet. Please follow the instructions on the notice or proxy card that you received. No proof of ownership is necessary because Vivint Solar can verify your ownership.

 

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If you hold your shares through an intermediary, such as a bank or broker, you must register in advance to attend the Vivint Solar virtual special meeting virtually on the Internet. To register to attend the Vivint Solar virtual special meeting online by webcast, you must submit proof of your proxy power (legal proxy) reflecting your Vivint Solar holdings, along with your name and email address, to Computershare by email to legalproxy@computershare.com or mail to Computershare, Vivint Solar, Inc. Legal Proxy, P.O. Box 43001, Providence, RI 02940-3001. Requests for registration must be labeled as “Legal Proxy” and be received no later than 11:59 pm, Eastern Time, on September 24, 2020.

Revocability of Proxies

Any Vivint Solar stockholder of record giving a proxy has the power to revoke it. If you are a Vivint Solar stockholder of record, you may revoke your proxy in any of the following ways:

 

   

By delivering to Vivint Solar’s Secretary (at Vivint Solar’s principal executive offices located at 1800 West Ashton Boulevard, Lehi, Utah 84043) a signed written notice of revocation bearing a later date than the proxy, stating that the proxy is revoked, which revocation is received prior to the proxy’s exercise at the Vivint Solar virtual special meeting;

 

   

By duly executing a subsequently dated proxy relating to the same shares of Vivint Solar common stock and returning it in the postage-paid envelope provided, which subsequent proxy is received before the prior proxy is exercised at the Vivint Solar virtual special meeting;

 

   

By duly submitting a subsequently dated proxy vote relating to the same shares of Vivint Solar common stock by telephone or via the Internet (using the original instructions provided to you) before 11:59 pm Eastern Time on September 30, 2020; or

 

   

By attending the Vivint Solar virtual special meeting and voting such shares during the Vivint Solar virtual special meeting as described above, although attendance at the Vivint Solar virtual special meeting will not, by itself, revoke a proxy.

If your shares are held by a bank, broker or other nominee, you may change your vote by submitting new voting instructions to your bank, broker or other nominee. You must contact your bank, broker or other nominee to find out how to do so.

Solicitation of Proxies; Expenses of Solicitation

The Vivint Solar Board is soliciting proxies for the Vivint Solar virtual special meeting from its stockholders. Vivint Solar will bear a portion of the cost of the solicitation of proxies, including preparation, assembly and delivery, as applicable, of this joint proxy statement/prospectus, the Vivint Solar proxy card and any additional materials furnished to Vivint Solar stockholders. Proxies may be solicited by directors, officers and a small number of Vivint Solar’s regular employees in person or by mail, email, or telephone, but such persons will not receive any additional compensation for these activities. Vivint Solar has retained Innisfree M&A Incorporated, a proxy solicitation firm, to assist in the solicitation of proxies for a fee of approximately $20,000 plus certain additional per-service fees and reasonable out-of-pocket costs and expenses. As appropriate, copies of solicitation material will be furnished to brokerage houses, fiduciaries and custodians that hold shares of Vivint Solar common stock of record for beneficial owners for forwarding to such beneficial owners. Vivint Solar may also reimburse persons representing beneficial owners for their costs of forwarding the solicitation material to such owners.

Tabulation of Votes

Vivint Solar has appointed Computershare, to serve as the Inspector of Election for the Vivint Solar virtual special meeting. Computershare will independently tabulate affirmative and negative votes and abstentions.

 

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Adjournments

Subject to certain restrictions contained in the merger agreement, the Vivint Solar virtual special meeting may be adjourned to allow additional time for obtaining additional proxies. No notice of an adjourned meeting need be given if the time and place thereof are announced at the Vivint Solar virtual special meeting at which the adjournment was taken unless:

 

   

the adjournment is for more than 30 days, in which case a notice of the adjourned meeting will be given to each Vivint Solar stockholder of record entitled to vote at the Vivint Solar virtual special meeting; or

 

   

if, after the adjournment, a new record date for determination of Vivint Solar stockholders entitled to vote is fixed for the adjourned meeting, in which case the Vivint Solar Board will fix as the record date for determining Vivint Solar stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of Vivint Solar stockholders entitled to vote at the adjourned meeting, and will give notice of the adjourned meeting to each Vivint Solar stockholder of record as of such record date.

At any adjourned meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the Vivint Solar virtual special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting.

Assistance and Additional Information

If you need assistance with submitting a proxy to vote your shares via the Internet, by telephone or by completing your Vivint Solar proxy card, or have questions regarding the Vivint Solar virtual special meeting, please contact Innisfree M&A Incorporated, the proxy solicitor for Vivint Solar at (877) 800-5187 (toll-free for stockholders) or (212) 750-5833 (collect for banks and brokers).

Your vote is very important regardless of the number of shares of Vivint Solar common stock that you own and the matters to be considered at the Vivint Solar virtual special meeting are of great importance to the stockholders of Vivint Solar. Accordingly, you are urged to read and carefully consider the information contained in or incorporated by reference into this joint proxy statement/prospectus and promptly submit your proxy via the Internet or by telephone or, if applicable, complete, date, sign and promptly return the enclosed Vivint Solar proxy card or voting instruction form in the enclosed postage-paid envelope. If you submit your proxy via the Internet or by telephone, you do not need to return the enclosed Vivint Solar proxy card.

Please vote your shares via the Internet or by telephone, or sign, date and return a Vivint Solar proxy card or voting instruction form promptly to ensure that your shares can be represented, even if you otherwise plan to attend the Vivint Solar virtual special meeting.

 

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VIVINT SOLAR PROPOSALS

Vivint Solar Proposal 1: Adoption of the Merger Agreement

Vivint Solar stockholders are asked to consider and vote on the Vivint Solar merger proposal as contemplated by the merger agreement. For a summary and detailed information regarding the Vivint Solar merger proposal, see the information about the merger and the merger agreement throughout this joint proxy statement/prospectus, including the information set forth in sections entitled “The Merger” and “The Merger Agreement”. A copy of the merger agreement is attached as Annex A to this joint proxy statement/ prospectus.

Pursuant to the merger agreement, approval of the Vivint Solar merger proposal is a condition to the consummation of the merger. If the Vivint Solar merger proposal is not approved, the merger will not be completed.

Approval of the Vivint Solar merger proposal requires the affirmative vote of the holders of a majority of the shares of Vivint Solar common stock outstanding as of the close of business on the Vivint Solar record date and entitled to vote on the Vivint Solar merger proposal.

Recommendation of the Vivint Solar Board

The Vivint Solar Board unanimously recommends that Vivint Solar stockholders vote “FOR” the Vivint Solar merger proposal.

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Vivint Solar Proposal 2: Vivint Solar Merger-Related Compensation

In accordance with Section 14A of the Exchange Act, Vivint Solar is providing its stockholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of certain of Vivint Solar’s named executive officers that is based on or otherwise relates to the merger disclosed in “The Merger—Interests of Vivint Solar’s Directors and Executive Officers in the Merger”. The non-binding advisory vote gives Vivint Solar stockholders the opportunity to express their views on the compensation of certain of Vivint Solar’s named executive officers related to the merger. Accordingly, Vivint Solar is requesting its stockholders to approve the following resolution, on a non-binding advisory basis:

“RESOLVED, that the compensation that may be paid or become payable to certain of Vivint Solar’s named executive officers that is based on or otherwise relates to the merger as disclosed pursuant to Item 402(t) of Regulation S-K in the section entitled “The Merger—Interests of Vivint Solar’s Directors and Executive Officers in the Merger—Quantification of Potential Payments and Benefits to Vivint Solar’s Named Executive Officers in Connection with the Merger” in the joint proxy statement/prospectus for the special meeting is hereby APPROVED.”

Approval of the Vivint merger-related compensation proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of Vivint Solar common stock, present or represented by proxy at the Vivint Solar virtual special meeting and entitled to vote on the Vivint Solar merger-related compensation proposal.

The vote on the Vivint Solar merger-related compensation proposal is a vote separate and apart from the vote to approve the Vivint Solar merger proposal. Accordingly, you may vote in favor of the approval of the Vivint Solar merger proposal and against the Vivint Solar merger-related compensation proposal, or vice versa. Approval of the Vivint Solar merger-related compensation proposal, on a non-binding advisory basis, is not a condition to the consummation of the transactions contemplated by the merger agreement, and it is advisory in nature only, meaning it will not be binding on Vivint Solar or Sunrun. Because there is a contractual obligation to

 

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pay the compensation, if the transactions contemplated by the merger agreement are completed, the compensation may be paid or become payable to certain of Vivint Solar’s named executive officers, subject only to the conditions applicable to such compensation payments, regardless of the outcome of the advisory vote on the Vivint Solar merger-related compensation proposal.

Recommendation of the Vivint Solar Board

The Vivint Solar Board unanimously recommends that Vivint Solar stockholders vote “FOR” the Vivint Solar merger-related compensation proposal.

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Vivint Solar Proposal 3: Adjournment of the Vivint Solar virtual special meeting

The Vivint Solar virtual special meeting may be adjourned to another time and place to permit further solicitation of proxies, if necessary or appropriate, to obtain additional proxies if there are not sufficient votes to approve the Vivint Solar merger proposal.

The Vivint Solar stockholders are being asked to consider and vote on the authorization of the holder of any proxy solicited by the Vivint Solar Board to vote in favor of granting discretionary authority to proxy holders, and each of them individually, to adjourn the Vivint Solar virtual special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Vivint Solar virtual special meeting to approve the Vivint Solar merger proposal. Vivint Solar does not intend to call a vote on the Vivint Solar adjournment proposal if the Vivint Solar merger proposal considered at the Vivint Solar virtual special meeting has been approved at the Vivint Solar virtual special meeting.

Approval of the Vivint Solar adjournment proposal requires the affirmative vote of holders of a majority of the voting power of the shares of Vivint Solar common stock, present or represented by proxy at the Vivint Solar virtual special meeting and entitled to vote on the Vivint Solar adjournment proposal. If the Vivint Solar virtual special meeting is adjourned for the purpose of soliciting additional proxies, Vivint Solar stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use.

The Vivint Solar adjournment proposal relates only to an adjournment of the Vivint Solar virtual special meeting for purposes of soliciting additional votes for approval of the Vivint Solar merger proposal. Vivint Solar retains full authority to the extent set forth in the Vivint Solar bylaws and Delaware law to adjourn the Vivint Solar virtual special meeting for any other purpose, or to postpone the Vivint Solar virtual special meeting before it is convened, without the consent of any Vivint Solar stockholder.

Recommendation of the Vivint Solar Board

The Vivint Solar Board unanimously recommends that Vivint Solar stockholders vote “FOR” the Vivint Solar adjournment proposal.

 

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THE PARTIES TO THE MERGER

Sunrun Inc.

Sunrun is one of the nation’s leading home solar, battery storage, and energy services companies. Sunrun’s mission is to provide our customers with clean, affordable solar energy and storage, and a best-in-class customer experience. Founded in 2007, Sunrun pioneered the residential solar service model, creating a low-cost solution for customers seeking to lower their energy bills. By removing the high initial cost and complexity of cash system sales that used to define the residential solar industry, Sunrun fostered the residential solar industry’s rapid growth and generated enormous consumer value. Sunrun’s innovative home battery solution, Brightbox, brings families affordable, resilient, and reliable energy. Sunrun can also manage and share stored solar energy from the batteries to provide benefits to households, utilities, and the electric grid while reducing our reliance on polluting energy sources. Sunrun’s relentless drive to increase the accessibility and affordability of solar energy is fueled by Sunrun’s enduring vision: to create a planet run by the sun.

Sunrun’s principal executive offices are located at 225 Bush Street, Suite 1400, San Francisco, California 94104, and its telephone number is (415) 580-6900.

Sunrun’s common stock is publicly traded on Nasdaq under the ticker symbol “RUN”. Additional information about Sunrun is included in documents incorporated by reference in this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus.

Vivint Solar, Inc.

Vivint Solar is a leading full-service residential solar provider in the United States. Founded in 2011, Vivint Solar provides homeowners with simple and affordable clean energy. With the help of Vivint Solar, homeowners can power their homes with clean, renewable energy, typically achieving significant financial savings over time. Vivint Solar designs and installs solar energy systems for homeowners and offers monitoring and maintenance services. In addition to being able to purchase a solar energy system outright, homeowners may benefit from Vivint Solar’s affordable, flexible financing options, including power purchase agreements, or lease agreements, where available. Vivint Solar also offers solar plus storage systems with LG Chem home batteries and electric vehicle chargers with ChargePoint Home.

Vivint Solar’s principal executive offices are located at 1800 West Ashton Boulevard, Lehi, Utah 84043 and its telephone number is (877) 404-4129.

Vivint Solar’s common stock is publicly traded on NYSE under the ticker symbol “VSLR”. Additional information about Vivint Solar is included in documents incorporated by reference in this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus.

Viking Merger Sub, Inc.

Merger Sub, a direct wholly owned subsidiary of Sunrun, is a Delaware corporation incorporated on July 2, 2020 for the purpose of effecting the merger. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. The principal executive offices of Merger Sub are located at 225 Bush Street, Suite 1400, San Francisco, California 94104, and its telephone number is (415) 580-6900.

 

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THE MERGER

The following is a discussion of material aspects of the merger. The description of the merger agreement in this section and elsewhere in this joint proxy statement/prospectus is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A, and is incorporated by reference into this joint proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the merger that is important to you. You are encouraged to read the merger agreement carefully and in its entirety. This section is not intended to provide you with any factual information about Sunrun or Vivint Solar. Such information can be found elsewhere in this joint proxy statement/prospectus and in the public filings Sunrun and Vivint Solar make with the SEC that are incorporated by reference into this joint proxy statement/prospectus, as described in the section entitled “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus.

Effect of the Merger

The merger agreement provides that, upon the terms and subject to the conditions set forth in the merger agreement, and in accordance with the DGCL, at the completion of the merger, Merger Sub will be merged with and into Vivint Solar. As a result of the merger, the separate corporate existence of Merger Sub will cease, and Vivint Solar will continue as the surviving corporation and a wholly owned subsidiary of Sunrun.

At the completion of the merger, the Vivint Solar certificate of incorporation and the Vivint Solar bylaws will be amended and restated in their entirety to be in the form of the certificate of incorporation as set forth in Exhibit A of the merger agreement and the bylaws as set forth in Exhibit B of the merger agreement.

Merger Consideration

At the completion of the merger, upon the terms and subject to the conditions set forth in the merger agreement, each share of Vivint Solar common stock issued and outstanding immediately prior to the effective time (other than shares of Vivint Solar common stock owned by Sunrun, Merger Sub, any other wholly owned subsidiary of Sunrun or Vivint Solar immediately prior to the effective time, including shares of Vivint Solar common stock held in treasury by Vivint Solar, and in each case not held on behalf of third parties, which are collectively referred to as the excluded shares) will be converted automatically into the right to receive the merger consideration, which is:

 

   

0.55 fully paid and nonassessable shares of Sunrun common stock; plus

 

   

if applicable, cash in lieu of fractional shares of Sunrun common stock;

 

   

less any applicable withholding taxes.

The 0.55 shares of Sunrun common stock into which each share of Vivint Solar common stock issued and outstanding immediately prior to the effective time, except for the excluded shares, will be converted is referred to as the exchange ratio.

The exchange ratio is fixed, which means that it will not change between now and the date of the completion of the merger, regardless of whether the market price of either Vivint Solar common stock or Sunrun common stock changes. Therefore, the value of the merger consideration will depend on the market price of Sunrun common stock at the completion of the merger.

The market price of Sunrun common stock has fluctuated since the date of the announcement of the merger and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date of the virtual special meetings, the date the merger is completed and thereafter. The market value of the Sunrun common stock to be issued in exchange for Vivint Solar common stock upon the completion of the merger will not be known at

 

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the time of the Vivint Solar virtual special meeting or the Sunrun virtual special meeting. Therefore, current and historical market prices of Sunrun common stock are not reflective of the value that Vivint Solar stockholders will receive in the merger, and the current stock price quotations for Vivint Solar common stock and Sunrun common stock may not provide meaningful information to Sunrun stockholders in determining whether to approve the Sunrun share issuance proposal or to Vivint Solar stockholders in determining whether to approve the Vivint Solar merger proposal. Sunrun’s common stock is traded on Nasdaq under the symbol “RUN”, and Vivint Solar’s common stock is traded on NYSE under the symbol “VSLR”. Sunrun stockholders and Vivint Solar stockholders are encouraged to review carefully the other information contained in this joint proxy statement/prospectus or incorporated by reference in this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 217 of this joint proxy statement/prospectus.

No fractional share of Sunrun common stock will be issued upon the conversion or surrender for exchange of certificates or book-entry shares, and such fractional share interests will not entitle the owner thereof to any Sunrun common stock or to vote or to any other rights of a holder of Sunrun common stock. Each holder of shares of Vivint Solar common stock converted pursuant to the merger who would otherwise have been entitled to receive a fraction of a share of Sunrun common stock (after aggregating all certificates and book-entry shares delivered by such holder) will receive, in lieu thereof, cash (rounded to the nearest cent), without interest, in an amount equal to such fractional amount a holder is entitled to receive multiplied by the dollar volume-weighted average price, rounded to four decimal points, of Sunrun common stock on Nasdaq during the period beginning at 9:30:01 am, New York time, and ending at 4:00:00 p.m., New York time (as reported by Bloomberg through its “HP” function (set to weighted average)) for the ten consecutive trading days prior to the date that is two business days prior to the completion of the merger. The payment of cash in lieu of fractional share interests pursuant to the terms and conditions set forth in the merger agreement is not separately bargained-for consideration.

In accordance with Section 262 of the DGCL, no appraisal rights will be available to holders of Vivint Solar common stock or Sunrun common stock in connection with the merger. Sunrun stockholders will continue to own their existing shares of Sunrun common stock, which will not be adjusted or otherwise changed by the merger.

Background of the Merger

Each of Sunrun’s and Vivint Solar’s management and respective board of directors, together with their legal and financial advisors, periodically review and assess various strategies, opportunities and alternatives that may enhance stockholder value. Such reviews and assessments have included, among other things, remaining as a stand-alone entity in light of the then-current business, economic and regulatory environments and entering into acquisitions, dispositions and strategic partnerships with other companies to further the respective company’s strategic objectives.

On July 20, 2015, Vivint Solar executed a definitive agreement (the “Original SunEdison Merger Agreement”) with SunEdison Inc. (“SunEdison”), pursuant to which a wholly owned subsidiary of SunEdison would have merged with and into Vivint Solar (the “SunEdison Merger”), with Vivint Solar continuing as a subsidiary of SunEdison. Pursuant to the SunEdison Merger Agreement, Vivint Solar stockholders were to receive consideration valued at $16.50 per share, consisting of $9.89 per share in cash, $3.31 per share in SunEdison stock and $3.30 per share in SunEdison convertible notes. The Original SunEdison Merger Agreement was subsequently amended on December 9, 2015 (so amended, the “SunEdison Merger Agreement”), pursuant to which Vivint Solar stockholders other than 313 Acquisition would have received cash consideration of approximately $9.97 per share as of the close of business on January 22, 2016 (the business day prior to the date of the proxy statement filed in respect of the SunEdison Merger), and 313 Acquisition, an affiliate of Blackstone which owned 77.3% of Vivint Solar’s shares of common stock as of such date, would have received consideration consisting of cash, convertible notes and common stock of SunEdison that also would have

 

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represented approximately $9.97 per share as of such date. On March 7, 2016, Vivint Solar terminated the SunEdison Merger Agreement for SunEdison’s failure to satisfy its obligations under the SunEdison Merger Agreement. On April 21, 2016, SunEdison filed for Chapter 11 bankruptcy.

Following the termination of the SunEdison Merger Agreement, Vivint Solar’s management and the Vivint Solar Board, together with their legal and financial advisors, continued to periodically review and assess various strategies, opportunities and alternatives that may enhance stockholder value, which reviews and assessments have included meeting with members of the management, board and advisors of other solar companies to discuss industry developments and possible opportunities for transactions.

As part of each company’s regular review and assessment of strategic opportunities, on occasion between December 2016 and mid-2018, Vivint Solar’s management and board and members of Sunrun’s management and board had discussions about potential strategic opportunities. Vivint Solar and Sunrun representatives recognized the potential strategic benefits of a combination between Vivint Solar and Sunrun, but the discussions were high-level with no specific terms discussed.

In mid-2018, a member of Vivint Solar management received a call from a member of management of a strategic party (“Party A”), who expressed interest in exploring potential strategic transactions with Vivint Solar. Vivint Solar and Party A already had a confidentiality agreement in place from past discussions regarding a potential business relationship. This confidentiality agreement did not restrict Party A from making unsolicited proposals to Vivint Solar or contain other standstill restrictions. Over the next few months, members of Vivint Solar management and members of Party A management engaged in preliminary discussions with respect to potential strategic transactions. These discussions were high-level and no specific terms were discussed.

In September 2018, David Bywater, Vivint Solar’s chief executive officer, received a call from a representative of a strategic party (“Party B”), who expressed interest in exploring potential strategic transactions with Vivint Solar. To facilitate additional discussions, Vivint Solar executed a confidentiality agreement with Party B and thereafter provided certain financial and other information to Party B. This confidentiality agreement did not restrict Party B from making unsolicited proposals to Vivint Solar or contain other standstill restrictions. Over the next few months, members of Vivint Solar management and members of Party B management engaged in preliminary discussions with respect to various potential transactions or other business opportunities between the two companies. At the regularly scheduled meeting of the Vivint Solar Board on September 19, 2018, Mr. Bywater advised the board in executive session of the status of discussions with Party B. While the discussions between Vivint Solar and Party B initially explored potential strategic transactions, the conversation shifted to commercial opportunities, and the parties ultimately entered into a commercial agreement. In between the regular meetings of the Vivint Solar Board on September 19, 2018 and January 17, 2019, members of the Vivint Solar Board discussed seeking views from investment banks as to potential strategic opportunities, including, among other opportunities, investments, partnerships and potential strategic transactions. Thereafter, members of Vivint Solar management met with four investment banks to discuss potential strategic opportunities. Morgan Stanley and BofA Securities were among the investment banks contacted. Vivint Solar has had a long-standing relationship with each of Morgan Stanley and BofA Securities. Morgan Stanley was engaged by Vivint Solar in connection with the SunEdison Merger, and BofA Securities, among other things, has led and participated in numerous financings for Vivint Solar, each as discussed in further detail in the section entitled “—Opinions of Vivint Solar’s Financial Advisors” beginning on page 106 of this joint proxy statement/prospectus.

On January 17, 2019, the Vivint Solar Board held a regularly scheduled meeting with members of Vivint Solar’s management in attendance. The board discussed in executive session potential strategic opportunities, including the views that had been provided by the investment banks. Following discussion, the Vivint Solar Board did not determine to take any additional steps with respect to potential strategic opportunities at that time.

During the spring of 2019, a representative of a private equity firm (“Party C”) called Peter Wallace, the chairperson of the Vivint Solar Board and a manager of 313 Acquisition, expressing Party C’s interest in

 

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exploring an acquisition of Vivint Solar. The representative of Party C indicated that Party C was considering a price in the range of $6.50-$7.00 per share of Vivint Solar common stock. Mr. Wallace told the representatives of Party C that any offer would need to be reviewed by the Vivint Solar Board. Mr. Wallace informed other members of the Vivint Solar Board and members of Vivint Solar management of this conversation. In order to determine if Party C would be interested in pursuing a transaction, Vivint Solar executed a confidentiality agreement with Party C on May 9, 2019 and thereafter provided certain financial and other information to Party C. Between March 20, 2019 and May 9, 2019, the closing prices of Vivint Solar’s common stock ranged from $4.78 to $7.24. This confidentiality agreement did not restrict Party C from making unsolicited proposals to Vivint Solar or contain other standstill restrictions. During June 2019, the Vivint Solar stock price traded above the high end of the $6.50-$7.00 range previously expressed by the representative of Party C. The Party C representative called Mr. Wallace and asked if the Vivint Solar Board would be interested in selling the company at a discount to the market price. Mr. Wallace indicated that he did not think the Vivint Solar Board would be interested in such a transaction and that 313 Acquisition, as the then majority stockholder of Vivint Solar, would not support such a transaction. The Party C representative subsequently asked Mr. Wallace if 313 Acquisition would be willing to entertain an offer to sell its majority stake in Vivint Solar to Party C at a discount to market, with the other Vivint Solar stockholders having the ability to participate through a tender offer made at the same price. Mr. Wallace subsequently informed the Party C representative that 313 Acquisition was not interested in such a transaction. Mr. Wallace subsequently informed the members of the Vivint Solar Board of his discussions with the Party C representative.

During the spring of 2019, a member of Vivint Solar management received a call from a representative of an investment bank regarding the possibility of a potential strategic transaction with a strategic party (“Party D”). Following an initial meeting between a member of Vivint Solar management and a member of Party D management, to facilitate additional discussions, Vivint Solar executed a confidentiality agreement with Party D on June 28, 2019 and thereafter provided certain financial and other information to Party D. This confidentiality agreement did not restrict Party D from making unsolicited proposals to Vivint Solar or contain other standstill restrictions. On July 15, 2019, three members of Vivint Solar’s management, including Mr. Bywater, met with members of Party D’s management to explore the possibility of a potential strategic transaction. Mr. Bywater had two subsequent calls with Party D’s chief executive officer during the second half of 2019. In these discussions, Party D’s chief executive officer reiterated Party D’s potential interest in a transaction but noted that Party D was not then prepared to explore a transaction at that time given other competing business priorities. These discussions were high-level and no specific terms were discussed and no offers were made at this time with respect to any strategic transaction between Vivint Solar and Party D.

Also during the spring of 2019, the investment bank that had contacted Vivint Solar with respect to Party D introduced members of Vivint Solar management to representatives of a private equity firm (“Party E”). To facilitate additional discussions, Vivint Solar executed a confidentiality agreement with Party E. This confidentiality agreement did not restrict Party E from making unsolicited proposals to Vivint Solar or contain other standstill restrictions. Members of Vivint Solar management shared certain financial and other information with Party E and had preliminary discussions with representatives of Party E. Following these discussions, a representative of Party E spoke with Mr. Wallace and proposed to acquire Vivint Solar at a substantial discount to the market price of Vivint Solar common stock. Mr. Wallace subsequently informed members of the Vivint Solar Board of such proposal, and there were no further discussions with Party E in light of the unattractive valuation proposed.

In June 2019, a member of Vivint Solar management called a representative of a strategic party (“Party F”) to explore potential strategic transactions between the two companies. Over the next several months, members of Vivint Solar management and members of Party F management engaged in preliminary discussions with respect to various potential transactions and other business opportunities. While the discussions initially explored potential strategic transactions, the conversation shifted to commercial opportunities, and the parties ultimately entered into commercial agreements.

 

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On June 27, 2019, the Vivint Solar Board held a regularly scheduled meeting with members of Vivint Solar’s management in attendance, which included a discussion in executive session of Vivint Solar’s strategic opportunities, including the recent interest from Party C, Party D and Party E discussed above. Mr. Wallace described his discussions with Party C and the Vivint Solar Board determined that it did not want to pursue a sale of the company at a discount to the market price. Mr. Bywater informed the Vivint Solar Board that several parties had recently contacted him on an unsolicited basis to express interest in exploring a potential strategic transaction with Vivint Solar, but that it was not clear how serious their interest was. The Vivint Solar Board discussed the possibility of commencing a formal process to explore a potential strategic transaction given the unsolicited indications of interest that Vivint Solar had received but also discussed that it was not yet clear whether there would be sufficient interest in the market to justify such a process. Accordingly, the Vivint Solar Board determined that members of the Vivint Solar Board should contact a few investment banks for their views. Following the meeting, Mr. Wallace informed Party C that the Vivint Solar Board did not intend to pursue further discussions with Party C at such time.

Following the June 27, 2019 meeting of the Vivint Solar Board, members of the Vivint Solar Board and Vivint Solar management discussed with representatives of Morgan Stanley, BofA Securities and another investment bank whether there might be third-party interest in a potential strategic transaction with Vivint Solar. The representatives of Morgan Stanley and BofA Securities each believed there could be interest in a potential strategic transaction with Vivint Solar.

During the second half of 2019, members of Vivint Solar’s management and the Vivint Solar Board conferred with Morgan Stanley and BofA Securities and discussed the possibility of commencing a process to explore a potential strategic transaction. Vivint Solar ultimately selected Morgan Stanley to act as its lead financial advisor and BofA Securities to act as an additional financial advisor in connection with a potential strategic transaction. Vivint Solar selected each of Morgan Stanley and BofA Securities based on its respective experience in transactions similar to the potential strategic transaction, qualifications, expertise and reputation and its knowledge of Vivint Solar and its business and the industries in which Vivint Solar conducts its business. During this time, members of Vivint Solar management, with the assistance of Vivint Solar’s advisors, prepared a “confidential information presentation” and assembled materials for an online data room in anticipation of a potential strategic transaction. Representatives of 313 Acquisition also participated in this process.

On November 6, 2019, consistent with the directive of the Sunrun Board to review and assess various strategic opportunities, Edward Fenster, executive chairman of the Sunrun Board, called Mr. Bywater and, after discussing industry matters, expressed interest in exploring a potential strategic transaction with Vivint Solar. Mr. Fenster did not make a proposal for a potential strategic transaction or discuss any terms. Mr. Bywater informed Mr. Fenster that any such proposal would need to be reviewed by the Vivint Solar Board, but that he would convey Mr. Fenster’s message to the Vivint Solar Board. Mr. Bywater shared Mr. Fenster’s interest with other members of the Vivint Solar Board and representatives of Morgan Stanley.

Beginning in early January 2020, at the direction of members of the Vivint Solar Board, representatives of Morgan Stanley and BofA Securities, on behalf of Vivint Solar, began to contact prospective counterparties in connection with a potential strategic transaction. During the course of the strategic transaction outreach process, 24 prospective bidders were contacted, including 8 strategic parties and 16 financial parties. Of the 24 prospective bidders, 15 executed confidentiality agreements, including (1) Sunrun, (2) Party C, (3) Party D, (4) a private equity firm (“Party G”) and (5) a strategic party (“Party H”). None of the 15 confidentiality agreements with the potential bidders restricted them from making unsolicited proposals to Vivint Solar or contained other standstill restrictions. While Party F was contacted in the course of the strategic transaction process, Party F declined to sign a confidentiality agreement and did not participate in further conversations with Vivint Solar with respect to a potential strategic transaction. Party A, Party B and Party E were not contacted in the course of the strategic transaction process because a potential combination with Party A was not expected to be attractive to the Vivint Solar Board or Vivint Solar’s stockholders, Party B had previously indicated that it was interested in pursuing commercial opportunities with Vivint Solar rather than a potential strategic transaction and Party E

 

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had previously proposed an unattractive valuation for Vivint Solar and was not expected to propose a valuation that would be attractive to the Vivint Solar Board.

On January 23, 2020, the Vivint Solar Board held a regularly scheduled meeting with members of Vivint Solar’s management in attendance, which included a discussion in executive session of Vivint Solar’s strategic opportunities, including a discussion of the commencement of the potential transaction process.

Over the course of January and early February 2020 (or, if earlier, the date on which a potential bidder ceased to pursue a potential transaction), each of the potential bidders that signed a confidentiality agreement conducted due diligence and was provided access to the online data room. The online data room included the confidential information presentation, which contained certain financial forecasts, and a financial model that, along with the financial forecasts in the confidential information presentation, was prepared by Vivint Solar management for the potential transaction process. Sunrun received a subset of such forecasts that excluded certain information relating to Vivint Solar’s “DevCo” (as discussed further in the section entitled “The Merger—Certain Vivint Solar Unaudited Prospective Financial Information” beginning on page 131 of this joint proxy statement/prospectus). We refer to such forecasts together as the “January Forecasts”. The bidders were asked to submit written preliminary indications of interest by February 19, 2020 should they wish to continue exploring a transaction involving Vivint Solar.

On February 14, 2020, at the request of Lynn Jurich, Sunrun’s chief executive officer, Mr. Bywater met with Ms. Jurich in Salt Lake City, Utah. Ms. Jurich conveyed Sunrun’s interest in pursuing a strategic transaction, and expressed that a transaction could present a potentially compelling opportunity for the stockholders of the two companies. Mr. Bywater told Ms. Jurich that he would convey Sunrun’s interest to the Vivint Solar Board.

On behalf of Vivint Solar, representatives of Morgan Stanley and BofA Securities received non-binding indications of interest from five parties. The ten other parties who had signed confidentiality agreements did not submit indications of interest. On February 19, 2020, Sunrun submitted an indication of interest proposing a strategic combination with Vivint Solar in which shares of Vivint Solar common stock would be exchanged for shares of Sunrun common stock at an unspecified exchange ratio that would be between 0 to 5% greater than an at-market exchange ratio. On February 19, 2020, Party C submitted an indication of interest proposing to acquire Vivint Solar for $8.00 to $9.00 per share in cash, and Party H submitted an indication of interest proposing to acquire Vivint Solar for $1.42 billion, or approximately $10.69 per share in cash. On February 21, 2020, Party G submitted an indication of interest proposing to acquire Vivint Solar for $10.50 to $11.00 per share in cash. On February 25, 2020, Party D submitted an indication of interest proposing to acquire Vivint Solar for $12.00 per share in cash or cash and stock. Between February 18, 2020 and February 25, 2020, the closing market price of shares of Vivint Solar common stock ranged from a low of $11.04 per share to a high of $12.85 per share.

On February 23, 2020, Mr. Fenster and Thomas Plagemann, Chief Commercial Officer of Vivint Solar, met at an industry conference in Las Vegas, Nevada. Mr. Fenster conveyed to Mr. Plagemann Sunrun’s interest in pursuing a strategic transaction. Promptly following this discussion, Mr. Plagemann reported his conversation with Mr. Fenster to Mr. Bywater.

On March 2, 2020, the Vivint Solar Board met telephonically with members of Vivint Solar’s management and representatives of Simpson Thacher & Bartlett LLP (“Simpson Thacher”) and Wilson Sonsini Goodrich & Rosati (“Wilson Sonsini”), each outside counsel to Vivint Solar, and Morgan Stanley, in attendance. Representatives of Morgan Stanley reviewed with the Vivint Solar Board the potential transaction process, the potential parties contacted and the indications of interest received from Sunrun, Party C, Party D, Party G and Party H. The representatives of Morgan Stanley and the Vivint Solar Board discussed whether to continue with the potential transaction process and, if so, which bidders should be advanced to the next round. The Vivint Solar Board supported the inclusion of Sunrun, Party D, Party G and Party H in the next round, but determined not to include Party C unless it meaningfully increased its proposed valuation. In addition, the Vivint Solar Board

 

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determined that representatives of Morgan Stanley should tell Sunrun that in order to be competitive, Sunrun would need to offer an exchange ratio with a premium that would exceed the 0 to 5% premium that it had previously proposed so as to share more of the synergy value with Vivint Solar’s stockholders. In addition, the representatives of Morgan Stanley were told to convey to Party D that the Vivint Solar Board was more interested in the all-cash transaction that Party D included in its offer letter (rather than the cash and stock alternative) and that the Vivint Solar Board would need to better understand Party D’s expected sources of third-party capital. Representatives of Wilson Sonsini reviewed with the Vivint Solar Board its fiduciary duties and also reviewed the anticipated regulatory approval process in connection with a potential transaction with Sunrun or Party D.

Between March 3 and 4, 2020, on behalf of Vivint Solar and consistent with the Vivint Solar Board’s directives, representatives of Morgan Stanley informed Sunrun, Party D, Party G and Party H that they would be included in the next round and informed Party C that it would not be included unless it made a meaningful increase to its proposed valuation. To support its proposed valuation, Party D asked Morgan Stanley for introductions to potential funding partners involved in the process.

On March 9, 2020, the Vivint Solar Board met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Representatives of Morgan Stanley reviewed with the Vivint Solar Board the status of the potential transaction process, including a request Morgan Stanley had received from Sunrun that it be provided exclusivity before continuing with its due diligence and Party D’s request for an introduction to potential funding partners involved in the process. Following discussion among the Vivint Solar Board, the Vivint Solar Board determined that no offer received to date was sufficiently attractive to grant exclusivity to any bidder (including Sunrun) and that Party D should be introduced to and be allowed to partner with Party C and continue in the next round of the potential transaction process. The Vivint Solar Board also discussed the possibility of forming a strategic transactions committee of the board to facilitate the efficient and responsive oversight and management of the potential transaction process. Following discussion, the Vivint Solar Board was supportive of forming such a committee, which would consist of David F. D’Alessandro, Joseph S. Tibbetts, Jr. and Peter Wallace, and agreed that a written consent setting forth the powers and responsibilities of the committee would be circulated following the meeting for the board’s approval. Representatives of Wilson Sonsini reviewed with the Vivint Solar Board the anticipated regulatory approval process in connection with a potential transaction with Sunrun or Party D.

On March 10, 2020, on behalf of Vivint Solar and consistent with the Vivint Solar Board’s directives, Morgan Stanley introduced Party D to Party C and indicated that they could partner together on a potential bid for Vivint Solar.

On March 15, 2020, by unanimous written consent, the Vivint Solar Board established a strategic transactions committee consisting of David F. D’Alessandro, Joseph S. Tibbetts, Jr. and Peter Wallace. The Vivint Solar strategic transactions committee was delegated the power and authority to, among other things, evaluate proposals relating to any potential strategic transaction, negotiate the terms of any agreement relating to any potential strategic transaction and make recommendations to the Vivint Solar Board with respect to any potential strategic transaction. Any potential strategic transaction would need to be approved by the Vivint Solar Board.

On March 19, 2020, Party G informed representatives of Morgan Stanley that it was no longer interested in pursuing a potential transaction in light of the recent volatility in the financial markets.

From March 2020 through July 2020 (or, if earlier, the date on which a potential bidder ceased to pursue a potential transaction), each of the potential bidders conducted due diligence, which included virtual presentations from Vivint Solar management, telephonic diligence sessions, review of additional documentary materials and other customary due diligence. During this time, Vivint Solar also conducted limited due diligence on Party D,

 

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which it ceased after Party D and Party C submitted a joint non-binding indication of interest in mid-April 2020 proposing an all-cash transaction. Vivint Solar also conducted due diligence on Sunrun, which included virtual presentations from Sunrun senior management, telephonic diligence sessions, review of additional documentary materials and other customary due diligence. Sunrun opened its virtual data room to Vivint Solar and its advisors on March 27, 2020.

On March 31, 2020, the Vivint Solar Board met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, Simpson Thacher and Wilson Sonsini in attendance. Representatives of Morgan Stanley reviewed with the Vivint Solar Board the status of the potential transaction process and the impact of COVID-19 on the stock market and the market price of shares of Vivint Solar’s common stock, which had declined 59.7% between March 3, 2020, and March 27, 2020. Morgan Stanley also noted that the bidders were asked to submit revised indications of interest in order to ascertain whether, in light of the significant decline in the market value of Vivint Solar’s common stock arising out of, among other things, COVID-19, the bidders continued to support the indicative valuations stated in their initial indications of interest. The Vivint Solar Board was supportive of this approach. Representatives of Simpson Thacher and Wilson Sonsini reviewed with the Vivint Solar Board the anticipated regulatory approval process for a potential transaction with Sunrun and the material provisions of the two draft merger agreements that were to be provided to bidders—one for cash bidders and the other for stock bidders—including the merger consideration, the treatment of equity awards and employee matters, restrictions on the ability of Vivint Solar to solicit alternative proposals and the ability to respond to certain unsolicited proposals, the closing conditions, the interim operating covenants, regulatory efforts covenants and the termination provisions and related fees.

On April 1, 2020, the Sunrun Board held a telephonic board meeting, which was attended by Sunrun senior management. Ms. Jurich and Mr. Fenster provided the Sunrun Board with background regarding a potential transaction with Vivint Solar, including an update on their conversations with representatives of Vivint Solar and Morgan Stanley. Ms. Jurich and Mr. Fenster described for the Sunrun Board their views with respect to the strategic rationale and challenges of a potential strategic transaction with Vivint Solar. After discussion, the Sunrun Board expressed support for a strategic transaction with Vivint Solar and authorized Sunrun senior management to continue to negotiate with representatives of Vivint Solar.

On April 15, 2020, the Vivint Solar Board held a regularly scheduled telephonic meeting with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities and Wilson Sonsini in attendance, which was largely focused on ordinary course matters and included an update from representatives of Morgan Stanley on the potential transaction process.

Later on April 15, 2020, Party C and Party D submitted a joint non-binding indication of interest proposing to acquire Vivint Solar for $6.00 per share in cash, of which up to 25% of the equity financing would be provided by Party D. The indication of interest noted that Party C would be willing to provide up to all of the equity financing if Party D did not participate in the transaction. The indication of interest was predicated on the receipt of exclusivity. On that day, the closing market price of shares of Vivint Solar common stock was $5.32 per share.

On April 16, 2020, the Vivint Solar strategic transactions committee met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, Simpson Thacher and Wilson Sonsini in attendance. Mr. Bywater reviewed with the Vivint Solar strategic transactions committee the status of the potential transaction process and the progress of bidders in submitting revised indications of interest, noting that: (i) Sunrun had informed Vivint Solar that it would need at least an additional week to submit a revised indication of interest; (ii) Party H had informed Vivint Solar that it would need at least three to four additional weeks; (iii) and Party C and Party D had submitted a non-binding indication of interest the prior day proposing to acquire Vivint Solar for $6.00 per share in cash and requesting exclusivity in order to finalize due diligence and definitive documentation with respect to the potential strategic transaction. Following discussion, the Vivint Solar strategic transactions committee was supportive of continuing to explore a potential transaction with Party C and Party D, but did not believe that Party C and Party D’s offer was sufficiently attractive for a grant of

 

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exclusivity. The Vivint Solar strategic transactions committee also discussed with representatives of Morgan Stanley how to respond to Party C and Party D’s indication of interest. In light of COVID-19, the Vivint Solar strategic transactions committee asked members of Vivint Solar management to prepare updated financial forecasts to help the Vivint Solar strategic transactions committee and the Vivint Solar Board evaluate Vivint Solar’s prospects and the proposals from bidders. The Vivint Solar strategic transactions committee discussed Vivint Solar’s recent efforts to secure mezzanine financing and whether to include Party C in the mezzanine financing process of which it was already aware through the materials that had been provided in due diligence as part of the potential transaction process. Following discussion, the Vivint Solar strategic transactions committee was supportive of allowing Party C to participate in the mezzanine financing process so long as Party C’s inclusion would not negatively affect the potential transaction process.

On April 17, 2020, the Vivint Solar strategic transactions committee met telephonically with members of Vivint Solar’s management and representatives of Simpson Thacher and Wilson Sonsini in attendance. The Vivint Solar strategic transactions committee reviewed its role and responsibilities in connection with a potential strategic transaction and then turned to a discussion of the timeline and next steps of the potential transaction process. Mr. Wallace then informed the Vivint Solar strategic transactions committee of a call he had received from a representative of Party C that morning to express Party C’s continued interest in a potential transaction and to reiterate Party C’s request for exclusivity in order to finalize due diligence and definitive documentation with respect to the potential strategic transaction, to which Mr. Wallace informed the Party C representative that Party C’s request would be reviewed by the Vivint Solar Board. Mr. Wallace, at the direction of the Vivint Solar Board, also asked the representative of Party C whether Party C would be interested in participating in the mezzanine financing process. The representative of Party C responded that Party C would potentially be interested in participating so long as it would not negatively affect Party C’s ability to participate in a proposed transaction. The Vivint Solar strategic transactions committee also discussed Party C’s renewed request for exclusivity and determined that Party C and Party D’s offer was still not sufficiently attractive for a grant of exclusivity.

On April 19, 2020, the Vivint Solar strategic transactions committee met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley in attendance. Members of Vivint Solar’s management discussed the updated financial forecasts with the Vivint Solar strategic transactions committee and representatives of Morgan Stanley. Management had prepared these forecasts at the request of the committee to take into account the potential effects of COVID-19. These forecasts are discussed further in the section entitled “The Merger—Certain Vivint Solar Unaudited Prospective Financial Information” beginning on page 131 of this joint proxy statement/prospectus).

On April 23, 2020, the Vivint Solar Board met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Representatives of Morgan Stanley reviewed with the Vivint Solar Board the status of the potential transaction process and the joint indication of interest that had been submitted by Party C and Party D. Members of Vivint Solar’s management reviewed the updated forecasts with the Vivint Solar Board and the assumptions that had changed since the January Forecasts to take into account the potential effects of COVID-19. A representative of Simpson Thacher reviewed with the Vivint Solar Board its fiduciary duties. The Vivint Solar Board also instructed management not to have any discussions with any bidder relating to post-closing employment or equity arrangements without the consent of the Vivint Solar Board. A member of Vivint Solar’s management reviewed with the Vivint Solar Board the progress of the mezzanine financing process.

On April 28, 2020, the Vivint Solar strategic transactions committee met telephonically with other members of the Vivint Solar Board, members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Representatives of Morgan Stanley reviewed with the Vivint Solar strategic transactions committee the status of the potential transaction process and its preliminary financial analyses based on the updated forecasts prepared by members of Vivint Solar’s management and reviewed with the Vivint Solar Board at its April 23, 2020 meeting. The Vivint Solar strategic transactions committee also discussed with representatives of Morgan Stanley and BofA Securities the proposal

 

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from Party C and Party D and potential responses. Following discussion, the committee supported keeping Party C and Party D in the potential transaction process, asking Party C and Party D to increase their proposed valuation to at least $6.50 per share and, in lieu of a grant of exclusivity, offering to pay a portion of the expenses of Party C, which was leading the diligence and negotiations on behalf of Party C and Party D.

On April 28, 2020, on behalf of Vivint Solar and consistent with the Vivint Solar strategic transactions committee’s directives, representatives of Morgan Stanley informed representatives of Party C that Vivint Solar would not provide Party C and Party D with exclusivity but would be willing to pay a portion of Party C’s expenses if Party C was to increase its proposed valuation to at least $6.50 per share.

Later on April 28, 2020, Sunrun submitted a revised non-binding indication of interest proposing a strategic combination with Vivint Solar in which each share of Vivint Solar common stock would be exchanged for 0.505 shares of Sunrun common stock, which represented an approximately 15% premium to the $5.93 per share closing market price of Vivint Solar common stock on April 27, 2020. The exchange ratio would also have a “collar” where the exchange ratio would be fixed unless the price of Sunrun common stock increased or decreased by more than 40%. Sunrun also sought exclusivity in order to proceed with its proposal.

On April 29, 2020, Party H informed representatives of Morgan Stanley that it was no longer interested in pursuing a potential transaction as a result of COVID-19’s impact on Party H, its difficulty in identifying strategic benefits of a potential transaction with Vivint Solar and concerns about Vivint Solar’s path to profitability.

On April 30, 2020, the Vivint Solar Board held a telephonic meeting with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Representatives of Morgan Stanley reviewed with the Vivint Solar Board the status of the potential transaction process and the revised indication of interest received from Sunrun and the joint indication of interest that had been submitted by Party C and Party D. Following discussion with Morgan Stanley and BofA Securities and, consistent with the view of the Vivint Solar strategic transactions committee at its April 28, 2020 meeting, the Vivint Solar Board supported, in lieu of exclusivity, offering to pay a portion of Party C’s expenses if they were to increase their proposed valuation to at least $6.50 per share. Representatives of Morgan Stanley also updated the Vivint Solar Board that Party H had decided to stop participating in the potential transaction process and reviewed the feedback they had received from Party H.

Also on April 30, 2020, the Sunrun Board held a telephonic board meeting, which was attended by Sunrun senior management. During the meeting, Ms. Jurich provided the Sunrun Board with an update on discussions with Vivint Solar, and discussed with the Sunrun Board the terms of Sunrun’s revised proposal to Vivint Solar, which included an exchange ratio of 0.505 shares of Sunrun common stock for each share of Vivint Solar common stock. Ms. Jurich also discussed finalizing the terms of Credit Suisse Securities (USA) LLC’s (“Credit Suisse”) engagement as Sunrun’s financial advisor. Credit Suisse was selected based on its long-standing relationship with Sunrun. Credit Suisse had been advising Sunrun senior management on potential discussions with Vivint Solar since February 2020. Ms. Jurich and Mr. Fenster reviewed and discussed Credit Suisse’s relevant qualifications, and Jeanna Steele, Sunrun’s General Counsel and Corporate Secretary, discussed the material relationships disclosure provided by letter by Credit Suisse, which was sent to the members of the Sunrun Board in advance of the meeting and is discussed in further detail in the section entitled “—Opinion of Sunrun’s Financial Advisor” beginning on page 98 of this joint proxy statement/prospectus. Following these discussions, and based on Credit Suisse’s relevant industry experience, expertise and qualifications in mergers and acquisitions, valuation, financing and capital markets, Credit Suisse’s historical relationship with, and knowledge of, Sunrun and Sunrun senior management’s recommendation, the Sunrun Board approved the engagement of Credit Suisse as financial advisor in connection with the potential strategic transaction with Vivint Solar. Ms. Steele led a discussion regarding the economic and other material terms attendant to engagement of Credit Suisse as financial advisor, and the Sunrun Board authorized management to finalize Sunrun’s engagement with Credit Suisse within specified parameters. The Sunrun Board then authorized Sunrun senior management to continue to proceed with negotiations with Vivint Solar.

 

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In April 2020, Sunrun management prepared certain financial forecasts in connection with the potential transaction process, which were shared with the Sunrun Board. Certain of these forecasts were shared with Vivint Solar and Credit Suisse in connection with the potential transaction process. For more information, see the section entitled “—Certain Sunrun Unaudited Prospective Financial Information” beginning on page 126 of this joint proxy statement/prospectus.

On May 2, 2020, outside counsel to Party C sent Vivint Solar a draft expense agreement. Over the course of the next week, Party C and Vivint Solar, assisted by their respective counsel, negotiated the terms of the expense agreement, including the amount and the terms on which expenses would be paid.

On May 8, 2020, the Vivint Solar Board met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Representatives of Morgan Stanley reviewed with the Vivint Solar Board the status of the potential transaction process and the revised indication of interest received from Sunrun and the joint indication of interest that had been submitted by Party C and Party D. Representatives of Morgan Stanley also reviewed with the Vivint Solar Board information regarding potential run-rate synergies that had been prepared by representatives of Sunrun (for further information about the potential synergies, see the section entitled “—Certain Estimated Synergies” beginning on page 136 of this joint proxy statement/prospectus). Morgan Stanley also noted that members of Vivint Solar management had reviewed and agreed with the conclusions set forth therein, and that members of Vivint Solar management provided an estimate of the cost to achieve such synergies and the timeline to achieve the run-rate synergies. Members of Vivint Solar management discussed with the Vivint Solar Board the updated forecasts (which are discussed further in the section entitled “The Merger—Certain Vivint Solar Unaudited Prospective Financial Information” beginning on page 131 of this joint proxy statement/prospectus), which had been further updated by members of Vivint Solar’s management to take into account the greater than expected adoption by customers of 25-year power purchase agreements that had been introduced in early 2020 and updates to Vivint Solar’s debt financing advance rate. The Vivint Solar Board then discussed with Morgan Stanley and BofA Securities potential responses to Sunrun. Mr. Wallace, in his capacity as a manager of 313 Acquisition, noted that 313 Acquisition did not have a need to sell its shares in the near-term and sought a strategy that maximizes Vivint Solar’s value for all Vivint Solar stockholders. Following discussion, the Vivint Solar Board directed members of Vivint Solar management and Morgan Stanley to prepare a list of key information needed from Sunrun before finalizing a response. Representatives of Morgan Stanley and Vivint Solar then reviewed with the Vivint Solar Board the discussions with Party C with respect to the expense agreement, and the Vivint Solar Board discussed the terms of the expense agreement and was supportive of finalizing the expense agreement. Representatives of Simpson Thacher and Wilson Sonsini reviewed with the Vivint Solar Board the updated drafts of the merger agreements to be provided to bidders, and discussed the anticipated regulatory approval process for a potential transaction with Sunrun or Party D.

On May 11, 2020, Party C and Vivint Solar executed the expense agreement, which provided for a work fee of $3.75 million that would be payable if (i) Vivint Solar notified Party C that it was no longer interested in pursuing a potential transaction with Party C, (ii) Vivint Solar entered into a definitive transaction agreement with a party other than Party C or (iii) in certain circumstances after Party C notified Vivint Solar that it was ready to execute the definitive transaction agreement most recently delivered to it by Vivint Solar at a price of at least $6.50 per share, subject to reduction for certain prepayment expenses that could be payable at the closing of a possible transaction in respect of the proposed mezzanine financing (referred to as the “Party C proposed price”), which was the price that Party C had verbally confirmed that it was offering over the course of negotiations of the expense agreement. The fee would not be payable if Party C was no longer interested in pursuing a potential transaction or was to decrease its proposed valuation below the Party C proposed price. On May 11, 2020, the closing market price of shares of Vivint Solar common stock was $6.15 per share.

On May 14, 2020, the Vivint Solar Board met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Representatives of Morgan Stanley reviewed with the Vivint Solar Board the status of the potential transaction

 

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process. Following discussion with Morgan Stanley and BofA Securities, the Vivint Solar Board was supportive of advancing Sunrun in the potential transaction process on a non-exclusive basis and seeking from Sunrun an increased exchange ratio of 0.535 without a collar, a regulatory termination fee payable to Vivint Solar if the merger does not close relating to the failure to obtain any necessary approvals of the applicable antitrust authorities, referred to herein as “regulatory approval,” and a support agreement from Tiger Global, Sunrun’s largest stockholder, which holds 24.9% of Sunrun’s outstanding common stock, which would require Tiger Global to vote its shares of Sunrun common stock in favor of the merger. Prior to the meeting, a representative of Vivint Solar furnished to the Vivint Solar Board disclosure statements provided by each of Morgan Stanley and BofA Securities, which identified prior or current engagements or relationships between the applicable financial advisor and the potential bidders and Blackstone and certain of its affiliates and portfolio companies, as discussed in further detail in the section entitled “—Opinions of Vivint Solar’s Financial Advisors” beginning on page 106 of this joint proxy statement/prospectus. Representatives of each of Morgan Stanley and BofA Securities reviewed the respective disclosure statement with the Vivint Solar Board. Representatives of each of Simpson Thacher and Wilson Sonsini also reviewed with the Vivint Solar Board the prior or current engagements or relationships between the applicable counsel and the potential bidders and Blackstone. Representatives of Simpson Thacher and C. Dan Black, Vivint Solar’s Chief Legal Officer, reminded management of Vivint Solar that management should not have any discussions with potential bidders relating to post-closing employment or equity arrangements without the consent of the Vivint Solar Board. A representative of Simpson Thacher also noted that Blackstone had engaged Richards, Layton & Finger, PA (“Richards, Layton”) to represent 313 Acquisition as a stockholder.

Later on May 14, 2020, on behalf of Vivint Solar and consistent with the Vivint Solar Board’s directives, representatives of Morgan Stanley provided Sunrun with the feedback that had been discussed with the Vivint Solar Board, including the increased exchange ratio of 0.535 without a collar, a regulatory termination fee and a support agreement from Tiger Global.

On May 15, 2020, the draft merger agreement providing for cash consideration was made available to Party C and Party D by Morgan Stanley via the virtual data room. Among other things, the draft proposed a “two-step” transaction structure involving a tender offer followed by a short-form merger to increase the speed and closing certainty of a potential transaction with Party C, a termination fee payable by Vivint Solar in an amount equal to 2.5% of Vivint Solar’s equity value, a “hell or high water” regulatory efforts standard and a right exercisable by Vivint Solar to require Party C not to allow Party D to participate in the transaction if it would delay or prevent regulatory clearance and no limit on Party C’s damages if there were a breach of the merger agreement.

On May 18, 2020, representatives of Morgan Stanley received a revised non-binding indication of interest from Sunrun providing for an exchange ratio of 0.515, which represented a 19% premium to the $6.10 per share closing market price of Vivint Solar common stock as of May 15, 2020, the last completed trading day prior to the revised Sunrun indication of interest, subject to a 40% collar. The revised indication of interest rejected the proposed regulatory termination fee, noted that Sunrun would be willing to seek a support agreement from Tiger Global later in the process, stated that Sunrun expected that 313 Acquisition would execute a support agreement, and reiterated Sunrun’s request for exclusivity.

On May 19, 2020, the Vivint Solar strategic transactions committee met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Representatives of Morgan Stanley reviewed with the Vivint Solar strategic transactions committee the revised indication of interest that had been received from Sunrun. Following discussion with Morgan Stanley and BofA Securities, the Vivint Solar strategic transactions committee was supportive of seeking from Sunrun an increased exchange ratio of 0.525 (without a collar) and a regulatory termination fee, and rejecting a grant of exclusivity.

 

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On May 20, 2020, Mr. Wallace spoke with Ms. Jurich and Mr. Fenster and conveyed the proposal approved by the Vivint Solar strategic transactions committee. Ms. Jurich and Mr. Fenster noted that Sunrun would agree to the proposal, including an increased exchange ratio of 0.525 (without a collar) and that Sunrun would proceed without exclusivity.

On May 21, 2020, Mr. Wallace and Bruce McEvoy, a member of the Vivint Solar Board and a manager of 313 Acquisition, spoke with Ms. Jurich and Mr. Fenster regarding the inclusion and potential size of a regulatory termination fee. Later on May 21, 2020, Mr. Fenster and Mr. Wallace spoke and agreed that any regulatory termination fee should be of a customary amount for a transaction of this nature.

On May 22, 2020, the Vivint Solar Board met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Mr. Wallace reviewed with the Vivint Solar Board the conversations he had had with Ms. Jurich and Mr. Fenster. Representatives of Morgan Stanley reviewed with the Vivint Solar Board the status of the potential transaction process. The Vivint Solar Board discussed with representatives of Simpson Thacher the post-closing governance of the combined company. In light of the Vivint Solar directors’ knowledge, familiarity and experience with Vivint Solar’s business and operations, all of which could benefit the combined company and the stockholders of the combined company, including Vivint Solar stockholders who would receive shares of the combined company in the merger, the Vivint Solar Board was supportive of having representation on the board of directors of the combined company. Representatives of Simpson Thacher and Wilson Sonsini discussed with the Vivint Solar Board provisions in the draft merger agreement that would be provided to Sunrun and the anticipated regulatory approval process for a potential transaction with Sunrun.

Later on May 22, 2020, the draft merger agreement providing for stock consideration was made available by Morgan Stanley to Sunrun via the virtual data room. Among other things, the draft proposed a termination fee in an amount equal to 4.0% of each party’s equity value, a regulatory termination payment potentially payable by Sunrun in an amount to be agreed, an expense reimbursement amount potentially payable by Sunrun in an amount equal to 1.0% of Sunrun’s equity value if its stockholders rejected the issuance of common stock by Sunrun in connection with the merger and a “hell or high water” regulatory efforts covenant unless Sunrun’s compliance with the covenant would result in a “material adverse effect” on the combined company.

On May 29, 2020, Cooley LLP (“Cooley”), outside counsel to Sunrun, sent a revised draft of the merger agreement to Simpson Thacher and Wilson Sonsini, which noted, as a condition to signing, that Vivint Solar’s chief executive officer and chief sales officer must execute employment agreements concurrently with the execution of the merger agreement. Thereafter, until the merger agreement was signed, Sunrun and Vivint Solar, assisted by their respective advisors, negotiated the terms of the merger agreement. These negotiations covered various aspects of the transaction, including, among other things, the representations and warranties made by the parties, the restrictions on the conduct of Sunrun’s and Vivint Solar’s respective businesses prior to the closing and the flexibility that Vivint Solar would have to respond to COVID-19, the extent to which COVID-19 could be taken into account in determining whether a “material adverse effect” has occurred, the efforts that Sunrun would be required to take to secure regulatory approvals, the efforts that Vivint Solar would be required to make to cooperate with Sunrun on financing matters, the conditions to completion of the merger, retention and other employee matters, the composition of the board of directors of the combined company following the completion of the merger, the rights of each party to negotiate with and provide information to a person who may make an alternative proposal, the rights of each party’s board of directors to change its recommendation in favor of the merger in response to a superior proposal or otherwise, the right of each party to match a superior proposal made by another person, the right of each party to terminate the merger agreement to accept a superior proposal under certain conditions, other termination provisions and the amount and triggers for payment of the termination fees and whether there would be an expense reimbursement amount under certain circumstances. In addition to the regulatory termination fee, the parties negotiated a termination fee of $54,000,000 payable by Vivint Solar if the merger agreement were terminated under certain circumstances (which as of the date of the merger agreement represented approximately 4.0% of Vivint Solar’s equity value and approximately 1.8% of Vivint Solar’s

 

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enterprise value) and a termination fee of $107,000,000 payable by Sunrun if the merger agreement were terminated under certain circumstances (which as of such date represented approximately 4.0% of Sunrun’s equity value and approximately 1.8% of Sunrun’s enterprise value).

On June 1, 2020, the draft support agreement for Tiger Global was made available to Sunrun by Morgan Stanley via the virtual data room, which provided, among other things, that Tiger Global would vote all of its shares of Sunrun common stock in favor of the issuance of Sunrun common stock in the merger.

Throughout the spring and summer of 2020, Sunrun management prepared certain financial forecasts in connection with the potential transaction process, which were shared with the Sunrun Board. Certain of these forecasts were shared with Credit Suisse in connection with the potential transaction process. For more information, see the section entitled “—Certain Sunrun Unaudited Prospective Financial Information” beginning on page 126 of this joint proxy statement/prospectus.

On June 2, 2020, the Vivint Solar strategic transactions committee met telephonically with members of Vivint Solar’s management and representatives of Simpson Thacher and Wilson Sonsini in attendance. Representatives of Simpson Thacher reviewed the current status of the negotiation of the merger agreement. The Vivint Solar strategic transactions committee also discussed whether Sunrun would require 313 Acquisition to agree to transfer restrictions with respect to shares of Sunrun common stock that it would receive in the merger. Representatives of Simpson Thacher noted that Blackstone had engaged Weil Gotshal & Manges LLP (“Weil”) as well as Richards, Layton to represent 313 Acquisition as stockholder in connection with the potential transaction.

On June 2, 2020, the closing market price of shares of Vivint Solar common stock was $8.30 per share. After the close of trading on June 2, 2020, Vivint Solar announced that it had completed two subsidiary-level financings on May 27, 2020 and May 29, 2020, for a total of $545 million of additional financing commitments. On June 3, 2020, the closing market price of shares of Vivint Solar common stock was $9.21 per share.

On June 9, 2020, counsel to Party C sent a revised draft of the merger agreement to Simpson Thacher and Wilson Sonsini, which, among other things, rejected the transaction structure of a tender offer followed by a short-form merger and instead proposed a one-step merger with 313 Acquisition delivering a written consent approving the transaction after execution of the merger agreement, rejected provisions allowing Vivint Solar to require Party C not to allow Party D to participate in the transaction if it would delay regulatory clearance and included a cap on damages for breaches of the merger agreement.

On June 10, 2020, on behalf of Sunrun, Cooley sent Simpson Thacher and Weil a draft support agreement for 313 Acquisition, which provided, among other things, that 313 Acquisition would vote all of its shares of Vivint Solar common stock in favor of the merger unless the Vivint Solar Board were to change its recommendation, in which case 313 Acquisition would only be required to vote a number of shares equal to 35% of the outstanding shares of Vivint Solar common stock. Until shortly before the merger agreement was signed, Sunrun and 313 Acquisition, assisted by their respective advisors, negotiated the terms of the proposed support agreement, including that 313 Acquisition would only be required to vote a number of shares equal to approximately 24.9% of the outstanding shares of Vivint Solar common stock if the Vivint Solar Board were to change its recommendation and the restrictions on 313 Acquisition’s ability to transfer its Vivint Solar shares or the Sunrun shares it would be issued in the merger.

Also on June 10, 2020, the Vivint Solar Board held a regularly scheduled telephonic meeting with members of Vivint Solar’s management and representatives of Morgan Stanley, Simpson Thacher and Wilson Sonsini in attendance. Members of Vivint Solar’s management provided the Vivint Solar Board with an update on Vivint Solar’s business performance. Representatives of Morgan Stanley reviewed with the Vivint Solar Board the status of the potential transaction process, noted that the 0.525 exchange ratio currently proposed by Sunrun would reflect a slight discount to an at-market exchange ratio based on the closing market price of $10.17 per

 

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share of Vivint Solar common stock on June 9, 2020 and noted that Party C’s proposed valuation of $6.50 per share was significantly lower than the closing market price. Following discussion with Morgan Stanley, the Vivint Solar Board was supportive of asking both Sunrun and Party C to revise their proposals to reflect an increased valuation of Vivint Solar. Members of Vivint Solar management addressed other ordinary course matters. In an executive session, the Vivint Solar Board noted Vivint Solar management’s performance through COVID-19 and discussed with Mr. Bywater his expectations as to the potential terms of employment agreements with him and Vivint Solar’s chief sales officer. Mr. Bywater acknowledged that he would need the consent of the Vivint Solar Board before he could engage in employment discussions with Sunrun.

On June 12, 2020, the Vivint Solar strategic transactions committee met telephonically with members of Vivint Solar’s management and representatives of Simpson Thacher and Wilson Sonsini in attendance. Representatives of Simpson Thacher reviewed the status of the discussions with Sunrun and Party C and received feedback from the Vivint Solar strategic transactions committee.

On June 13, 2020, the Vivint Solar strategic transactions committee met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, Simpson Thacher and Wilson Sonsini in attendance. Representatives of Morgan Stanley reviewed with the Vivint Solar strategic transactions committee the status of the potential transaction process and discussed the timing and potential response to Sunrun and Party C. Following discussion, the Vivint Solar strategic transactions committee was supportive of asking both Sunrun and Party C to revise their proposals to reflect an increased valuation of Vivint Solar. A representative of Simpson Thacher updated the Vivint Solar strategic transactions committee on the negotiations with Sunrun, and the Vivint Solar strategic transactions committee discussed potential responses.

On June 14, 2020, Mr. Wallace spoke with a representative of Party C and informed the representative that Party C would need to increase its proposed valuation in light of the increase in Vivint Solar’s market value. The representative of Party C informed Mr. Wallace that Party C was not willing to submit a revised indication of interest until it was further along in its due diligence.

On June 15, 2020, Messrs. Bywater, Tibbetts, Wallace and McEvoy had a telephonic meeting with Ms. Jurich and Mr. Fenster to discuss the key terms of the merger agreement.

On June 16, 2020, Mr. Bywater, at the direction of the Vivint Solar Board, spoke to Ms. Jurich to inform her that Sunrun needed to increase its proposed exchange ratio in light of the increase in Vivint Solar’s market value and relative outperformance compared to Sunrun’s market value. Also on June 16, 2020, on behalf of Vivint Solar and consistent with the Vivint Solar Board’s directives, representatives of Morgan Stanley spoke with representatives of Credit Suisse to inform them that Sunrun needed to increase its proposed exchange ratio in light of the increase in Vivint Solar’s market value.

Later on June 16, 2020, the Vivint Solar strategic transactions committee met telephonically with members of Vivint Solar’s management and representatives of Simpson Thacher and Wilson Sonsini in attendance. Mr. Bywater updated the Vivint Solar strategic transactions committee with respect to the call with Ms. Jurich and Mr. Fenster on June 15, 2020 and with respect to the call he had with Ms. Jurich earlier that day.

Also on June 16, 2020, Ms. Steele sent to the Sunrun Board an updated material relationships disclosure letter provided by Credit Suisse and a summary of the terms of the engagement of Credit Suisse.

On June 17, 2020, at the direction of Sunrun management and consistent with the Sunrun Board’s directives, representatives of Credit Suisse spoke to representatives of Morgan Stanley to inform them that Sunrun was not willing to discuss a revised exchange ratio but would revisit the topic prior to announcement after all other terms of the merger agreement were finalized.

Also on June 17, 2020, on behalf of Vivint Solar and consistent with the Vivint Solar Board’s directives, representatives of Morgan Stanley also spoke with a representative of Party C and informed the representative

 

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that Party C would need to increase its proposed valuation in light of the increase in Vivint Solar’s market value. The representative of Party C informed Morgan Stanley that Party C was not willing to submit a revised indication of interest until it was further along in its due diligence.

On June 20, 2020, the Sunrun Board held a telephonic board meeting, which was attended by Sunrun senior management. Ms. Jurich provided the Sunrun Board with an update on discussions with Vivint Solar, including the status of due diligence and negotiations regarding the terms of the merger agreement, including the exchange ratio of 0.525 that had been most recently proposed by Sunrun. Ms. Jurich also indicated to the Sunrun Board Sunrun senior management’s intention to make Sunrun’s largest stockholder, Tiger Global, aware of the proposed transaction in the near future in order to permit Tiger Global to sign a support agreement with respect to the proposed transaction. Ms. Jurich then reviewed certain key considerations of the proposed transaction, including: employee matters; the impact (and potential future impact) of the COVID-19 pandemic on the business of Vivint Solar; and Sunrun’s financial analysis of the potential combined company, including estimated amounts of net synergies to be generated from the proposed transaction (for further information about the potential synergies, see the section entitled “—Certain Estimated Synergies” beginning on page 136 of this joint proxy statement/prospectus). Ms. Steele also described key open items in the merger agreement and a summary of key due diligence issues. After discussion, the Sunrun Board expressed their support of the key transaction terms reviewed by Ms. Jurich and authorized Sunrun senior management to continue with negotiations with Vivint Solar.

On June 23, 2020, the Vivint Solar Board met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Representatives of Morgan Stanley reviewed with the Vivint Solar Board the status of the potential transaction process. The Vivint Solar Board discussed with Morgan Stanley and BofA Securities the timing of soliciting revised proposals from Sunrun and Party C and was supportive of requiring Party C to provide a revised proposal by June 29, 2020. Representatives of Simpson Thacher and Wilson Sonsini reviewed with the Vivint Solar Board the outstanding material issues in Sunrun’s revised merger agreement and the anticipated regulatory approval process of a potential transaction. Representatives of Simpson Thacher informed the Vivint Solar Board that earlier that day they had had a call with Party C’s outside counsel during which Party C’s outside counsel asked questions about the draft merger agreement that Simpson Thacher had circulated on June 16, 2020. Neither Party C nor its counsel engaged further on the merger agreement subsequent to that day. After representatives of Morgan Stanley and BofA Securities left the meeting, the Vivint Solar Board discussed and approved the compensation to be paid to Morgan Stanley and BofA Securities in connection with the execution of a potential transaction.

On June 29, 2020, at the direction of the Sunrun Board, Mr. Fenster sent Vivint Solar a proposal, which Mr. Fenster and Mr. Wallace subsequently discussed by phone, to resolve the open issues in the merger agreement, which included a proposed exchange ratio of 0.535 and proposed transfer restrictions on the shares that 313 Acquisition would receive in the merger. Thereafter, Sunrun and 313 Acquisition, assisted by their respective advisors, negotiated the terms of the proposed transfer restrictions, including the proposed restrictions on transfer prior to the Vivint Solar stockholder vote, after the Vivint Solar stockholder vote and after the closing of the merger.

On June 30, 2020, the Vivint Solar strategic transactions committee met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, Simpson Thacher and Wilson Sonsini in attendance. A representative of Simpson Thacher discussed the remaining open issues in the merger agreement. Representatives of Morgan Stanley noted that Party C had not yet submitted a revised proposal and discussed with the committee seeking an improved exchange ratio from Sunrun.

On July 1, 2020, the Vivint Solar strategic transactions committee met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Mr. Wallace reviewed with the Vivint Solar strategic transactions committee the

 

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call he had with Mr. Fenster earlier that day. The Vivint Solar strategic transactions committee discussed seeking a revised exchange ratio from Sunrun with representatives of Morgan Stanley and BofA Securities and the timing and logistical considerations of a potential transaction with Sunrun. Following discussion, the Vivint Solar strategic transactions committee was supportive of seeking a revised exchange ratio from Sunrun of 0.55.

Following the meeting of the Vivint Solar strategic transactions committee on July 1, 2020, Mr. Wallace spoke with Mr. Fenster to express the Vivint Solar Board’s request for an exchange ratio of 0.55. Later in the day on July 1, 2020, at the direction of the Sunrun Board, Mr. Fenster proposed an exchange ratio of 0.545 to Messrs. Bywater, Wallace and McEvoy.

On July 2, 2020, the Vivint Solar Board met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Mr. Wallace noted that a representative of Party C had called to inform him that Party C would be seeking the approval of its investment committee on Monday, July 6, 2020, to submit a revised proposal that would likely be less than Vivint Solar’s current market value. A representative of Simpson Thacher reviewed with the Vivint Solar Board Sunrun’s revised proposal. Mr. Wallace noted for the Vivint Solar Board that 313 Acquisition had agreed in principle with Sunrun on transfer restrictions relating to 313 Acquisition’s shares in Vivint Solar and the shares of Sunrun it would receive in the merger. Mr. Bywater reviewed with the Vivint Solar Board the continued requirement from Sunrun that, concurrently with the signing of the merger agreement, he and Chance Allred, the chief sales officer of Vivint Solar, enter into employment agreements with Sunrun, the terms of which Sunrun had not yet provided or discussed with him or Mr. Allred. Mr. Bywater also noted that Sunrun had begun to seek Tiger Global’s support for a transaction. Representatives of Morgan Stanley reviewed with the Vivint Solar Board the potential transaction process. Representatives of each of Morgan Stanley and BofA Securities reviewed with the Vivint Solar Board their respective preliminary financial analyses relating to Vivint Solar, Sunrun and a proposed transaction. Following discussion of the revised proposal, the Vivint Solar Board was supportive of again seeking a revised exchange ratio of 0.55. In light of the progress that had been made on the key issues in the merger agreement and Sunrun’s requirement that employment agreements with Messrs. Bywater and Allred be entered into concurrently with the signing of the merger agreement and the time needed for Messrs. Bywater and Allred, along with their own counsel, to negotiate these agreements with Sunrun and Cooley, the Vivint Solar Board permitted Mr. Bywater to speak with Sunrun about the terms of his and Mr. Allred’s employment agreements with Sunrun.

On July 2, 2020, Simpson Thacher sent Cooley a revised merger agreement proposal, which included a revised exchange ratio of 0.55. Following receipt of the revised proposal, Ms. Jurich and Mr. Fenster spoke to each member of the Sunrun Board to assess their support for increasing the exchange ratio to 0.55. Based on the discussions at previous meetings, each member of the Sunrun Board supported the increase.

On July 3, 2020, at the direction of the Sunrun Board, Mr. Fenster informed Mr. Wallace that Sunrun would agree to a revised exchange ratio of 0.55.

From July 3, 2020 through July 6, 2020, Sunrun and Vivint Solar, together with Simpson Thacher and Cooley, finalized the merger agreement. During this time, Weil and Cooley negotiated a registration rights agreement covering shares of Sunrun common stock that 313 Acquisition would receive in the merger and finalized the 313 Acquisition support agreement. During this time, Cooley, Simpson Thacher and Schulte Roth & Zabel, counsel to Tiger Global, also negotiated a support agreement for Tiger Global, and employment offer letters for Mr. Bywater and Mr. Allred were negotiated between Sunrun and Mr. Bywater and Mr. Allred, with the assistance of counsel that they had separately engaged for their employment arrangements.

On July 5, 2020, the Vivint Solar Board met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Mr. Wallace noted that a representative of Party C had called to inform him that Party C would likely be able to submit a revised proposal the following day that would increase the proposed valuation to around $8.00 per

 

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share, and Mr. Wallace noted that he had informed the representative of Party C that such a valuation would not be competitive. A representative of Simpson Thacher reviewed with the Vivint Solar Board the material terms of the merger agreement and related documents and the material terms of the employment agreements between Messrs. Bywater and Allred and Sunrun. Representatives of each of Morgan Stanley and BofA Securities reviewed with the Vivint Solar Board its respective preliminary financial analyses relating to each of Vivint Solar and Sunrun on a stand-alone basis, of the combined company taking into account the proposed merger and the effect of potential synergies. The forecasts reviewed at the May meeting were further updated to take into account the consummation of Vivint Solar’s holding company financing (the updated forecasts prepared in April 2020, as further updated in May 2020 and July 2020, as described above, are collectively referred to herein as the “Updated Forecasts,” and are discussed further in the section entitled “—Certain Vivint Solar Unaudited Prospective Financial Information” beginning on page 131 of this joint proxy statement/prospectus). Representatives of each of Morgan Stanley and BofA Securities also discussed with the Vivint Solar Board its respective preliminary financial analysis related to the exchange ratio most recently proposed by Sunrun. Following discussion, the Vivint Solar Board was supportive of finalizing a definitive agreement for the Vivint Solar Board’s final consideration.

On July 6, 2020, the Sunrun Board held a virtual board meeting, which was attended by Sunrun senior management. At the request of Sunrun senior management, representatives of Cooley and Axinn, Veltrop & Harkrider LLP (“Axinn”), outside counsel with respect to antitrust matters to Sunrun, and Credit Suisse, financial advisor to Sunrun, also attended the meeting. Ms. Jurich provided an update on discussions with Vivint Solar, including that Sunrun and Vivint Solar had agreed to an exchange ratio of 0.55. Ms. Steele then provided the Sunrun Board with a further update on the status of diligence, and Ms. Jurich provided an update regarding the discussions that she had with Mr. Bywater with respect to the pre-signing employment agreements with Mr. Bywater and Mr. Allred. Representatives of Cooley discussed the directors’ fiduciary duties in connection with the Sunrun Board’s evaluation of the potential strategic transaction with Vivint Solar. Representatives of Credit Suisse reviewed Credit Suisse’s financial analyses with respect to the transaction and rendered Credit Suisse’s oral opinion, confirmed by delivery of a written opinion, to the Sunrun Board to the effect that, as of such date and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse as described in such written opinion, the exchange ratio was fair, from a financial point of view, to Sunrun. The full text of the written opinion of Credit Suisse is attached to this joint proxy statement/prospectus as Annex B and is incorporated by reference in this joint proxy statement/prospectus in its entirety. See also the section entitled “—Opinion of Sunrun’s Financial Advisor” beginning on page 98 of this joint proxy statement/prospectus. Representatives of Cooley and Axinn then provided an updated summary of the proposed terms of the merger agreement and the employment agreements that were anticipated to be entered into in connection with the transaction and described the resolutions the directors would be asked to consider if they were to approve the transaction. At the conclusion of the meeting, after careful review and discussion by the Sunrun Board, including consideration of the factors described below under the section entitled “Sunrun Board’s Recommendation and Reasons for the Merger,” the Sunrun Board (i) approved and declared advisable, fair to and in the best interests of Sunrun and its stockholders, the merger agreement, the merger and all other transactions, ancillary agreements, documents and other instruments identified in and contemplated by the merger agreement; and (ii) directed that the Sunrun share issuance proposal and the Sunrun adjournment proposal be submitted to the Sunrun stockholders for approval.

Later on July 6, 2020, following the close of trading on the NYSE and Nasdaq, the Vivint Solar Board met telephonically with members of Vivint Solar’s management and representatives of Morgan Stanley, BofA Securities, Simpson Thacher and Wilson Sonsini in attendance. Prior to the meeting, a representative of Vivint Solar furnished to the Vivint Solar Board updated disclosure statements provided by each of Morgan Stanley and BofA Securities. A representative of Simpson Thacher provided the Vivint Solar Board with an update on the merger agreement and a summary of the material changes to the merger agreement since the meeting of the Vivint Solar Board the prior day, and the material terms of the employment agreements between Messrs. Bywater and Allred and Sunrun. At the request of the Vivint Solar Board, after referencing its financial analysis of the exchange ratio reviewed with the Vivint Solar Board the prior day and noting the closing price per share of

 

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Vivint Solar common stock and Sunrun common stock on July 6, 2020 and the fact that the proposed exchange ratio was unchanged, Morgan Stanley rendered to the Vivint Solar Board its oral opinion, which was subsequently confirmed by delivery of a written opinion dated July 6, 2020, to the effect that, as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in such written opinion, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to the holders of shares of Vivint Solar common stock (other than the excluded shares). At the request of the Vivint Solar Board, after reviewing its financial analysis, BofA Securities rendered to the Vivint Solar Board its oral opinion, which was subsequently confirmed by delivery of a written opinion, dated July 6, 2020, to the effect that, as of such date and based upon and subject to the various assumptions and limitations described in the written opinion, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to the holders of shares of Vivint Solar common stock. The full text of the written opinion of each of Morgan Stanley and BofA Securities is attached to this joint proxy statement/prospectus as Annexes C and D and is incorporated by reference in this joint proxy statement/prospectus in its entirety. See also the sections entitled “—Opinions of Vivint Solar’s Financial Advisors—Opinion of Morgan Stanley” and “—Opinions of Vivint Solar’s Financial Advisors—Opinion of BofA Securities, Inc.” beginning on page 106 and 118 of this joint proxy statement/prospectus, respectively. Mr. Black then noted the resolutions before the Vivint Solar Board. The Vivint Solar Board unanimously approved and declared advisable and fair to and in the best interests of Vivint Solar and its stockholders, the merger agreement, the Vivint Solar support agreement, the Sunrun support agreement and the merger, and unanimously recommended that Vivint Solar stockholders vote to adopt the merger agreement.

Following the approval of the Vivint Solar Board of the merger and the merger agreement, later in the evening on July 6, 2020, the parties executed the merger agreement and the other documentation related to the proposed transaction. Concurrently with the execution of the merger agreement, 313 Acquisition delivered a support agreement to vote in favor of the merger and the registration rights agreement, Tiger Global delivered a support agreement to vote in favor of the issuance of Sunrun common stock in the merger and Messrs. Bywater and Allred delivered employment agreements with Sunrun.

On the evening of July 6, 2020, Sunrun and Vivint Solar issued a joint press release announcing the merger.

Following the announcement of the merger, on July 20, 2020, a representative of Coatue Management, L.L.C. (“Coatue Management”) contacted Mr. Tom vonReichbauer, Sunrun’s chief financial officer, to express interest in purchasing newly-issued shares of Sunrun common stock from Sunrun. Promptly following this conversation, Mr. vonReichbauer informed Ms. Jurich and Mr. Fenster about Coatue Management’s outreach. On July 21, 2020, following further discussion with Ms. Jurich and Mr. Fenster, Mr. vonReichbauer informed the representative of Coatue Management that Sunrun was not interested in issuing additional shares of Sunrun common stock at that time, but that the representative of Coatue Management could contact 313 Acquisition to explore the possibility of acquiring a portion of the shares of Vivint Solar common stock held by 313 Acquisition. Later on July 21, 2020, a representative of Coatue Management contacted a representative of Blackstone about the possibility of acquiring a portion of the shares of Vivint Solar common stock held by 313 Acquisition. Thereafter, Mr. Wallace, as a manager of 313 Acquisition, and the representative of Coatue Management had discussions regarding the possibility of Coatue Management acquiring a portion of the shares of Vivint Solar common stock held by 313 Acquisition (the “Coatue transaction”).

Following Mr. Wallace’s discussions with Coatue Management, 313 Acquisition, Coatue Management and Sunrun engaged in discussions regarding: (i) Sunrun granting a consent to 313 Acquisition to facilitate the share purchase, as required by the Sunrun support agreement; (ii) Coatue US 24 LLC (“Coatue”), a vehicle affiliated with Coatue Management, and Sunrun entering into a support agreement with respect to the shares of Vivint Solar common stock to be acquired by Coatue from 313 Acquisition (the “Acquired Shares”) and a lock-up agreement with respect to the shares of Sunrun common stock Coatue will receive in connection with the merger in respect of its Acquired Shares (such shares of Sunrun common stock, the “Acquired Sunrun Shares”); (iii) 313

 

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Acquisition and Coatue entering into a stock purchase agreement with respect to the Coatue transaction; and (iv) 313 Acquisition and Sunrun amending the Sunrun support agreement to reflect the disposition of shares to Coatue. Between August 3, 2020 and August 18, 2020, 313 Acquisition, Coatue and Sunrun, as applicable, negotiated and executed such definitive documentation with respect to the share purchase. To facilitate Coatue Management’s due diligence, Coatue Management entered into a confidentiality agreement with Vivint Solar on August 15, 2020. For details regarding the Coatue support agreement, the Coatue lock-up agreement and the amended Sunrun support agreement, see the section entitled “The Merger—The Ancillary Agreements” beginning on page 149 of this joint proxy statement/prospectus.

On August 18, 2020, Sunrun and Vivint Solar issued a joint press release announcing Coatue’s agreement to purchase 11,627,907 shares of Vivint Solar common stock from 313 Acquisition for $21.50 per Vivint Solar common share, which was based on the trailing 10-day volume weighted average price of Vivint Solar common stock with a reference date of August 4, 2020. The Coatue transaction closed on August 21, 2020. As a result, 313 Acquisition’s ownership of Vivint Solar common stock was reduced from approximately 55.5% to approximately 46.0% of the outstanding shares and Vivint Solar will no longer qualify as a “controlled company” within the meaning of the New York Stock Exchange corporate governance rules.

Reasons for the Merger

Sunrun Board’s Recommendation and Reasons for the Merger

At a meeting held on July 6, 2020, after careful consideration, the Sunrun Board unanimously:

 

   

determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, fair to and in the best interests of Sunrun and its stockholders;

 

   

approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated by the merger agreement; and

 

   

recommended that the Sunrun stockholders vote in favor of the proposal of the issuance of Sunrun common stock in the merger pursuant to the terms of the merger agreement.

In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, including the issuance of shares of Sunrun common stock in the merger, the Sunrun Board did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Sunrun Board considered all these factors as a whole, including discussions with Sunrun management and legal and financial advisors, and, overall, considered the factors to be favorable to, and to support, its determination. The Sunrun Board concluded that, in the aggregate, the potential benefits considered outweighed the potential risks or possible negative consequences of approving the merger and the other transactions contemplated by the merger agreement (including the Sunrun share issuance proposal). The following factors that the Sunrun Board considered are not provided in any specific order or ranking:

 

   

After the effective time, it is anticipated that Sunrun and Vivint Solar will have nearly 500,000 customers and over 3 gigawatts of solar assets on the balance sheet. Sunrun is expected to have improved access to project finance and other capital at lower costs and better terms, as well as improved efficiency from cost synergies and spreading the combined company’s fixed costs across a larger customer base. The Sunrun Board believes these synergies will enable a better overall value for customers through lower pricing and the acceleration of grid services and battery deployment. Sunrun believes that the merger will enhance its ability to compete with incumbent utilities powered by fossil fuels and to attract and serve new customers through improved prices and quality, increasing consumer choice in how they create and consume power.

 

   

Sunrun believes that its expanded sales organization, larger installed base, and improved financial strength following consummation of the merger will lead to greater opportunities for marketing its solar offerings. Sunrun offers solar services through a number of channels that do not include the

 

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direct-to-home (also known as “door-to-door”) sales channel where Vivint Solar obtains most of its business. The merger therefore offers a complementary avenue for customer acquisition and may help increase Sunrun’s market reach and capabilities. Through the addition of the direct-to-home sales channel and Sunrun’s and Vivint Solar’s combined scale, as well as opportunities for cross-selling to the companies’ existing customers, Sunrun also expects to offer new services to certain existing customers, bringing greater opportunities for consumers to save money on their electric bills and decrease dependence on fossil fuels.

 

   

Sunrun is expected to realize annual cost synergies after completing the merger due to increased operating efficiencies and leveraging economies of scale, including expected annual run rate cost synergies of approximately $90 million. Sunrun expects to achieve cost synergies from consolidating and optimizing its branch footprint, reducing redundant spending on technology systems, scaling its proprietary racking technology, and improving supply chain sourcing capabilities. Sunrun also expects to realize scale benefits from shared corporate functions, including accounting, HR, legal, and policy. See the section entitled “—Certain Estimated Synergies” beginning on page 136 of this joint proxy statement/prospectus.

 

   

Sunrun and Vivint Solar have overlapping footprints in 17 states in the United States and over 95% of Sunrun and Vivint Solar branches are in close proximity. This provides the opportunity to consolidate overhead expenses and achieve viable scale in areas that would otherwise be operating at a loss. Sunrun expects that this right-sizing of branches will reduce operating costs and the cost of customer acquisition and allow it to offer better pricing to consumers. Additionally, the merger will allow Sunrun to operate efficiently in more areas and to expand its domestic footprint, enabling it to bring affordable, innovative solar products to additional customers.

 

   

Sunrun is a leader in the shaping and execution of grid services arrangements, which deliver demand response and capacity services to meet the operational needs of the electricity system. Sunrun believes that Vivint Solar’s direct-to-home sales model is well suited to originating solar and storage customers that would participate in grid services programs. Through the merger, the combination of Sunrun’s grid services capabilities and Vivint Solar’s direct-to-home sales model will enable Sunrun to expand its execution of grid services arrangements, benefitting consumers, utilities and the grid by building a more resilient electricity system.

 

   

Sunrun expects that Vivint Solar’s complementary research and development resources should enable Sunrun to provide new and better services, which will better allow it to further its mission of accelerating the adoption of renewable energy and decreasing the United States’ dependence on fossil fuels.

 

   

After the effective time, Sunrun expects to have diversified revenue streams, substantial Adjusted EBITDA and a strong balance sheet. The Sunrun Board believes that this stronger financial position will improve the combined company’s ability to support research and development strategies; implement supply path optimization initiatives; respond more quickly and effectively to customer needs, technological change, increased competition and shifting market demands; and pursue strategic growth opportunities in the future. See the sections entitled “—Certain Sunrun Unaudited Prospective Financial Information” and “—Certain Vivint Solar Unaudited Prospective Financial Information” beginning on pages 126 and 131, respectively, of this joint proxy statement/prospectus for a more detailed description of certain of Sunrun’s prospective financial information following the consummation of the merger.

 

   

The fact that the merger consideration is based on a fixed exchange ratio and will not change based on changes in the trading prices of Sunrun common stock or Vivint Solar common stock or changes in the business performance or financial results of Sunrun or Vivint Solar, which provides certainty as to the number of shares of Sunrun common stock that will be issued to Vivint Solar stockholders.

 

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The earnings accretion that the Sunrun Board believes will result from the merger, including the fact that the merger is expected to result in adjusted diluted earnings per share accretion by the third year following completion of the merger.

 

   

The enhanced resilience that results from having diverse service offerings and a larger customer base, which the Sunrun Board believes will help mitigate potential negative effects of the COVID-19 pandemic on its current and future business operations.

 

   

Management’s view of the financial condition, results of operations, businesses and prospects of Sunrun and Vivint Solar before and after giving effect to the merger.

 

   

The fact that Sunrun’s senior management team will continue to lead Sunrun and are highly skilled and capable of managing Sunrun and achieving the long-term value being sought by Sunrun in the merger.

 

   

The fact that David Bywater, the current chief executive officer of Vivint Solar, has agreed to join Sunrun and serve on the Sunrun Board, which will enhance Sunrun’s ability to retain key service providers and integrate the two companies.

 

   

The belief that the terms of the merger agreement, including the parties’ representations, warranties and covenants, and the conditions to their respective obligations, are reasonable.

 

   

The Sunrun Board’s review and discussions with Sunrun management concerning the due diligence investigation of Vivint Solar, including its review of Vivint Solar’s financial condition, results of operation, market areas, growth potential, technology and intellectual property.

 

   

The financial analyses reviewed and discussed with the Sunrun Board by representatives of Credit Suisse and the oral opinion of Credit Suisse rendered to the Sunrun Board on July 6, 2020 (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion dated as of the same date and which is attached as Annex B to this joint proxy statement/prospectus) that, as of July 6, 2020, and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse and referred to in such opinion, the exchange ratio set forth in the merger agreement was fair, from a financial point of view, to Sunrun, as set forth in such opinion and more fully described below under the section entitled “—Opinion of Sunrun’s Financial Advisor” beginning on page 98 of this joint proxy statement/prospectus.

 

   

The ability of Sunrun and Vivint Solar to complete the merger, including their ability to obtain necessary stockholder and regulatory approvals, including as a result of the commitments made by each of the company’s respective largest stockholder under the Sunrun support agreement and Vivint Solar support agreement.

 

   

The financial and other terms of the merger agreement, expected tax treatment, the prohibitions on Sunrun’s and Vivint Solar’s ability to seek alternative acquisition proposals (except as explicitly provided in the merger agreement), the termination provisions, and certain restrictions on conduct which would fall outside of the ordinary course of business for each of Sunrun and Vivint Solar between the date of the merger agreement and the date of completion of the merger, each of which it reviewed with its outside legal advisors.

 

   

The requirement that Vivint Solar compensate Sunrun in specified circumstances if the merger does not occur.

The Sunrun Board also considered potential risks relating to the merger and other transactions contemplated by the merger agreement, including the following:

 

   

The fact that there can be no assurance that the anticipated strategic and financial benefits of the merger will be achieved, including that the anticipated synergies resulting from the merger will be achieved and/or reflected in the trading price of Sunrun common stock following the completion of the merger.

 

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The dilution that Sunrun stockholders will experience.

 

   

The risk that because the exchange ratio is fixed, the value of the stock to be issued by Sunrun in connection with the merger could fluctuate and increase between the original signing of the merger agreement and the completion of the transactions contemplated by the merger agreement and that Sunrun cannot be certain of the market value of the merger consideration until completion of the merger. Accordingly, if the value of Vivint Solar’s business declines relative to the value of Sunrun’s business prior to completion of the merger, the ownership percentage of the current Vivint Solar stockholders in Sunrun following the completion of the merger may exceed Vivint Solar’s relative contribution to Sunrun following the completion of the merger.

 

   

The challenges inherent in the management and operation of Sunrun following the consummation of the merger, including the risk that integration costs may be greater than anticipated and integration may require greater-than-anticipated management attention and focus after the completion of the merger and may divert resources from the operation of Sunrun’s and Vivint Solar’s respective businesses and other strategic opportunities and towards the completion of the merger and the integration of Vivint Solar.

 

   

The challenges inherent in the combination of two businesses of the size, scope and complexity of Sunrun and Vivint Solar, including the potential for unforeseen difficulties in integrating operations and systems, difficulties and costs of integrating or retaining employees and customers and difficulties maintaining key supplier relationships.

 

   

The risk of disruption in, and challenges to, the integration of Vivint Solar’s operations, sales infrastructure and research and development activities with those of Sunrun.

 

   

The risk that despite the efforts of Sunrun, key personnel might not remain employed by Sunrun after completion of the merger which could significantly affect the anticipated benefits of adding Vivint Solar’s direct-to-home sales channel.

 

   

The risk that the COVID-19 pandemic could negatively impact Sunrun, Vivint Solar or the solar energy industry generally, or otherwise affect the merger or combined company, including potential challenges to a direct-to-home sales model.

 

   

The risk that the transaction could result in adverse tax consequences related to the ownership of Vivint Solar’s solar energy systems, such as property tax liability in the state of California.

 

   

The risk that the merger with Vivint Solar might not be completed in a timely manner or at all and the attendant adverse consequences for Sunrun’s business as a result of the pendency of the merger and operational disruption.

 

   

The substantial costs that Sunrun will incur in connection with the merger and other transactions contemplated by the merger agreement, even if they are not consummated, including in connection with any litigation that may result from the announcement or pendency of the merger.

 

   

The potential length of the regulatory approval process and the period of time during which Sunrun may be subject to the merger agreement and the potential impact on Vivint Solar’s and Sunrun’s ability to attract and retain employees and customers and maintain business relationships.

 

   

The possibility that regulatory or governmental authorities may impose requirements, limitations or costs or place restrictions on the conduct of Sunrun’s business after completion of the merger, and that such conditions, terms, obligations or restrictions may have the effect of delaying closing of the merger or imposing additional material costs on, or materially limiting the revenues of, the combined company following the merger, or otherwise adversely affecting Sunrun’s businesses and results of operations after completion of the merger.

 

   

The risk that Sunrun must pay Vivint Solar a termination fee of (i) $107 million or (ii) $45 million in certain circumstances following the termination of the merger agreement as more fully described below under the section entitled “The Merger Agreement—Expenses and Termination Fees” beginning on page 175 of this joint proxy statement/prospectus.

 

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The potential negative effect of the failure of the merger to be completed on a timely basis or at all, including as a result of not obtaining the necessary regulatory approvals, on Sunrun’s business and relationships with employees, customers, providers, vendors and governmental authorities, including regulators, and the communities in which Sunrun operates.

 

   

The risk that, although the merger agreement prohibits Vivint Solar from soliciting a transaction from a third party to acquire Vivint Solar, the merger agreement permits Vivint Solar to provide information to, and enter into discussions or negotiations with, a third party regarding a potential acquisition of Vivint Solar if, among other circumstances specified in the merger agreement, prior to obtaining Vivint Solar stockholder approval of the Vivint Solar merger proposal, Vivint Solar receives an unsolicited, bona fide written proposal from such third party to acquire Vivint Solar and, among other requirements, the Vivint Solar Board determines that such proposal is or could reasonably be expected to lead to a superior proposal to acquire Vivint Solar.

 

   

The risk that, subject to compliance with the terms of the merger agreement, in response to the receipt of a superior proposal to acquire Vivint Solar, prior to obtaining Vivint Solar stockholder approval of the Vivint Solar merger proposal, the Vivint Solar Board may change its recommendation that Vivint Solar stockholders vote “FOR” the Vivint Solar merger proposal.

 

   

The risk that, subject to compliance with the terms of the merger agreement, in response to certain events or circumstances that materially improve the financial condition or results of operations of Vivint Solar and that were not known or reasonably foreseeable to the Vivint Solar Board (or if known or reasonably foreseeable, the material consequences of which were not known or reasonably foreseeable) as of the date of the signing of the merger agreement, the Vivint Solar Board may change its recommendation that Vivint Solar stockholders vote “FOR” the Vivint Solar merger proposal.

 

   

The fact that the merger agreement places certain restrictions on the conduct of Sunrun’s business prior to completion of the merger, which may prevent Sunrun from making certain acquisitions or otherwise pursuing certain business opportunities which would be considered outside of the ordinary course of business during the pendency of the merger.

 

   

The fact that during the term of the merger agreement, Sunrun is prohibited from soliciting, initiating or knowingly encouraging or facilitating the submission of any acquisition proposal, or participating in any discussions or negotiations regarding an acquisition proposal, subject to certain exceptions, and the requirement that the Sunrun Board submit the Sunrun share issuance proposal for approval even if it withdraws its recommendation in favor thereof.

 

   

The fact that certain of Sunrun’s directors and executive officers have interests in the merger that may be different from, or in addition to, those of Sunrun stockholders generally, as more fully described under the section entitled “—Interests of Sunrun’s Directors and Executive Officers in the Merger” beginning on page 137 of this joint proxy statement/prospectus.

 

   

The fact that certain senior executives of Vivint Solar may receive substantial payments in connection with the merger, as more fully described in the section entitled “—Interests of Vivint Solar’s Directors and Executive Officers in the Merger” beginning on page 137 of this joint proxy statement/prospectus, and that a portion of the payments may not be deductible for federal and state income tax purposes by the combined company.

The foregoing discussion of the factors considered by the Sunrun Board is not intended to be exhaustive, but, rather, includes the material factors considered by the Sunrun Board in reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, including the issuance of shares of Sunrun common stock in the merger.

In considering the recommendation of the Sunrun Board with respect to the proposal of the issuance of Sunrun common stock in the merger pursuant to the terms of the merger agreement, you should be aware that

 

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some of Sunrun’s directors and executive officers may have interests in the merger that are different from, or in addition to, yours. The Sunrun Board was aware of and considered these interests, among other matters, in evaluating the merger agreement and the transactions contemplated by the merger agreement, and in recommending that the Sunrun share issuance proposal be approved by Sunrun stockholders. See the section entitled “—Interests of Sunrun’s Directors and Executive Officers in the Merger” beginning on page 137 of this joint proxy statement/prospectus.

It should be noted that this explanation of the reasoning of the Sunrun Board and certain information presented in this section is forward-looking in nature and, therefore, that information should be read in light of the factors discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements” beginning on page 37 of this joint proxy statement/prospectus.

THE SUNRUN BOARD UNANIMOUSLY RECOMMENDS THAT SUNRUN STOCKHOLDERS VOTE “FOR” THE SUNRUN SHARE ISSUANCE PROPOSAL AND “FOR” THE SUNRUN ADJOURNMENT PROPOSAL.

Vivint Solar Board’s Recommendation and Reasons for the Merger

At its meeting on July 6, 2020, after careful consideration, the Vivint Solar Board unanimously:

 

   

determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, fair to and in the best interests of Vivint Solar and its stockholders;

 

   

approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated by the merger agreement; and

 

   

recommended that the Vivint Solar stockholders vote in favor of the adoption of the merger agreement and the merger.

In reaching its determination, the Vivint Solar Board consulted with and received the advice of Vivint Solar’s management and its outside financial and legal advisors and, at its July 6, 2020 meeting and at other meetings at which it considered the proposed transaction, carefully considered a number of factors that the Vivint Solar Board viewed as supporting its decision, including the following factors:

 

   

the potential strategic benefits and opportunities the Vivint Solar Board believes will result from the merger, including the following:

 

   

the combined company will be a leading home solar and energy services company across the United States with a customer base of nearly 500,000 and over 3 gigawatts of solar assets on the balance sheet;

 

   

the complementary nature of Vivint Solar’s and Sunrun’s offerings and the potential for increasing the combined company’s reach and capabilities in a growing segment—including through the companies’ complementary go-to-market strategies;

 

   

the opportunities for cost synergies (estimated to be approximately $90 million on an annual basis) across the entire cost base, certain of which can be passed through to consumers, including consolidating and optimizing branch locations, reducing redundant spending on technology systems, scaling proprietary racking technology, as well as improving sourcing capabilities within supply chains and scale benefits from shared corporate functions including accounting, human resources, legal, and policy;

 

   

the expected revenue synergies from a larger base of solar assets and benefits from efficiencies in large scale project finance capital raising activities;

 

   

the combined company’s potential ability to achieve better financing terms given its greater scale than Vivint Solar could obtain as an independent company; and

 

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combining R&D resources and focusing efforts will allow the combined company to accelerate the offering of advanced solutions, such as virtual power plants and other energy services programs, to more customers in more markets;

 

   

the opportunity for Vivint Solar stockholders to participate in the future earnings and growth of the combined company, any synergies achieved by the combined company and future appreciation in the value of the combined company’s shares following the merger;

 

   

the exchange ratio is fixed and will not fluctuate as a result of changes in the market value of Vivint Solar common stock or Sunrun common stock, which provides certainty as to the respective pro forma percentage ownership of the combined company;

 

   

the historical share prices of Vivint Solar and Sunrun, including the implied premium of approximately 10% based on the closing prices on July 6, 2020, the date of the announcement of the merger, of Vivint Solar common stock and Sunrun common stock, and the implied premium of approximately 15% based on the three month volume weighted average prices of Vivint Solar common stock and Sunrun common stock;

 

   

the financial condition, results of operations, businesses and prospects of Vivint Solar and Sunrun before and after giving effect to the merger;

 

   

the financial presentation by Morgan Stanley and the oral opinion of Morgan Stanley rendered to the Vivint Solar Board, subsequently confirmed by delivery of a written opinion dated July 6, 2020, that as of the date of such opinion and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in such written opinion, the exchange ratio was fair from a financial point of view to the holders of shares of Vivint Solar common stock (other than the excluded shares), as more fully described in the section entitled “—Opinions of Vivint Solar’s Financial Advisors—Opinion of Morgan Stanley” beginning on page 106 of this joint proxy statement/prospectus;

 

   

the financial presentation by BofA Securities and the oral opinion of BofA Securities rendered to the Vivint Solar Board, subsequently confirmed by delivery of a written opinion dated July 6, 2020, that as of the date of such opinion and based upon and subject to the various assumptions and limitations set forth in such written opinion, the exchange ratio was fair from a financial point of view to the holders of Vivint Solar common stock, as more fully described in the section entitled “—Opinions of Vivint Solar’s Financial Advisors—Opinion of BofA Securities, Inc.” beginning on page 118 of this joint proxy statement/prospectus;

 

   

the merger will provide the opportunity for improved liquidity for Vivint Solar stockholders as a result of the increased equity capitalization and the larger stockholder base of the combined company;

 

   

the belief, following discussions with Vivint Solar’s management, that the merger is more favorable to Vivint Solar stockholders than other strategic alternatives available to Vivint Solar, including remaining as an independent public company, the feasibility of such alternatives and the significant risks and uncertainties associated with pursuing such alternatives;

 

   

Vivint Solar conducted a thorough process to explore Vivint Solar’s strategic alternatives during which representatives of Vivint Solar contacted and sought proposals from numerous potential parties, none of whom made a proposal that offered a value greater than the merger consideration;

 

   

the merger agreement provides Vivint Solar with the ability, under specified circumstances, to consider an acquisition proposal and provides the Vivint Solar Board with the ability, under specified circumstances, to make a change in recommendation if an intervening event occurs or a superior proposal is made;

 

   

the requirement that Sunrun pay Vivint Solar a termination fee of $107 million in certain circumstances if the merger agreement is terminated, as more fully described in the section entitled “The Merger

 

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Agreement—Expenses and Termination Fees” beginning on page 175 of this joint proxy statement/prospectus;

 

   

the requirement that Sunrun pay Vivint Solar a regulatory termination fee of $45 million in certain circumstances if the merger agreement is terminated due to failure to obtain regulatory approval as more fully described in the section entitled “The Merger Agreement—Expenses and Termination Fees” beginning on page 175 of this joint proxy statement/prospectus;

 

   

the transaction is anticipated to qualify as a tax-free transaction to both Vivint Solar and its stockholders, as well as Sunrun and its stockholders, for U.S. federal income tax purposes;

 

   

the support of 313 Acquisition LLC which held approximately 55.5% of the outstanding shares of Vivint Solar common stock as of the date of the merger agreement (and holds approximately 46.0% of the outstanding shares as of the date of this joint proxy statement/prospectus), and its willingness to enter into an agreement pursuant to which it agreed, among other things, to vote its shares of Vivint Solar common stock in favor of the approval of the merger and against any alternative proposal, as more fully described in the section entitled “—The Ancillary Agreements—Vivint Solar Support Agreement” beginning on page 151 of this joint proxy statement/prospectus;

 

   

the support of Tiger Global Investments, L.P. and Tiger Global Long Opportunities Master Fund, L.P. which held approximately 24.9% of the outstanding shares of Sunrun common stock as of the date of the merger agreement, and their willingness to enter into an agreement pursuant to which they agreed, among other things, to vote their shares of Sunrun common stock in favor of the approval of the issuance of shares of Sunrun common stock pursuant to the merger agreement and against any alternative proposal, as more fully described in the section entitled “—The Ancillary Agreements—Sunrun Support Agreement” beginning on page 149 of this joint proxy statement/prospectus; and

 

   

the other terms of the merger agreement, including representations, warranties and covenants of the parties, as well as the conditions to their respective obligations under the merger agreement and the fact that the terms of the merger agreement were the result of arms-length negotiation.

The Vivint Solar Board also considered a variety of risks and other potentially negative factors in considering the merger agreement, the merger and the other transactions contemplated by the merger agreement, including the following factors:

 

   

that, because the exchange ratio is fixed in the merger agreement and will not fluctuate as a result of changes in the market value of Vivint Solar common stock or Sunrun common stock, a decline in the value of Sunrun common stock would reduce the value of the Sunrun common stock received in the merger;

 

   

that, under the terms of the merger agreement, Vivint Solar must pay to Sunrun a $54 million termination fee if the merger agreement is terminated under specified circumstances, which might discourage or deter other parties from proposing an alternative transaction that may be more advantageous to Vivint Solar stockholders, or which may become payable in circumstances where no alternative transaction or superior proposal is available to Vivint Solar, as more fully described in the section entitled “The Merger Agreement—Expenses and Termination Fees” beginning on page 175 of this joint proxy statement/prospectus;

 

   

that the merger agreement restricts Vivint Solar from soliciting alternative transactions and limits its ability to furnish non-public information to, or participate in discussions with, third parties interested in making an alternative transaction proposal, as more fully described in the sections entitled “The Merger Agreement—Covenants and Agreements—No Solicitation of Alternative Transactions” beginning on page 165 of this joint proxy statement/prospectus and “The Merger Agreement—Covenants and Agreements—Changes in Board Recommendations” beginning on page 167 of this joint proxy statement/prospectus;

 

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while the merger is expected to be completed, the merger may not be completed or the completion of the merger might be unduly delayed because of reasons beyond the control of Vivint Solar and/or Sunrun, including due to a failure to obtain the necessary regulatory approvals;

 

   

the impact that failure to complete or delays in completing the merger could have on the business and operating results of Vivint Solar and the trading price of shares of Vivint Solar common stock;

 

   

the risk of diverting management focus and resources from operational matters and other strategic opportunities while working to implement the merger;

 

   

provisions in the merger agreement restricting operation of Vivint Solar’s business during the period between the signing of the merger agreement and consummation of the merger may delay or prevent Vivint Solar from undertaking business opportunities which would be considered outside of the ordinary course that may arise or other actions it would otherwise take with respect to its operations absent the pending completion of the merger, as more fully described in the section entitled “The Merger Agreement—Covenants and Agreements—Conduct of Business of Vivint Solar” beginning on page 161 of this joint proxy statement/prospectus;

 

   

the risk that the cost saving and revenue synergies and other anticipated benefits might not be fully realized or not realized at all, including as a result of possible changes in the solar energy industry affecting the segments in which the combined company will operate;

 

   

the risk of customer, supplier, management, research and development activities and employee disruption associated with the merger and integration of the operations of the companies;

 

   

the risk of other potential difficulties in integrating the two companies and their respective operations;

 

   

the risk that Vivint Solar or Sunrun may be unable to retain key employees;

 

   

the costs to be incurred in connection with the merger, including transaction expenses and integration costs;

 

   

some of Vivint Solar’s directors and executive officers have interests in the merger that are different from, or in addition to, Vivint Solar stockholders generally, as more fully described in the section entitled “—Interests of Vivint Solar’s Directors and Executive Officers in the Merger” beginning on page 137 of this joint proxy statement/prospectus;

 

   

the absence of appraisal rights under Delaware law; and

 

   

other matters described under the sections entitled “Risk Factors” beginning on page 39 of this joint proxy statement/prospectus and “Cautionary Note Regarding Forward-Looking Statements” beginning on page 37 of this joint proxy statement/prospectus.

The foregoing discussion of the factors considered by the Vivint Solar Board is not intended to be exhaustive and is not provided in any specific order or ranking. The Vivint Solar Board did not quantify or assign any relative weights to the factors considered in its consideration of the merger agreement, the merger and the other transactions contemplated by the merger agreement, and individual directors may have given different weights to different factors. The Vivint Solar Board considered all these factors as a whole, including discussions with, and questioning of, Vivint Solar’s management and financial and legal advisors, and, overall, considered these factors to be favorable to, and to support, its determination. The Vivint Solar Board concluded that, in the aggregate, the potential benefits considered outweighed the potential risks or possible negative consequences of approving the merger and the other transactions contemplated by the merger agreement.

The explanation and reasoning of the Vivint Solar Board and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements” beginning on page 37 of this joint proxy statement/prospectus.

 

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THE VIVINT SOLAR BOARD UNANIMOUSLY RECOMMENDS THAT VIVINT SOLAR STOCKHOLDERS VOTE “FOR” THE VIVINT SOLAR MERGER PROPOSAL, “FOR” THE VIVINT SOLAR MERGER-RELATED COMPENSATION PROPOSAL AND “FOR” THE VIVINT SOLAR ADJOURNMENT PROPOSAL.

Opinion of Sunrun’s Financial Advisor

Sunrun retained Credit Suisse as financial advisor to the Sunrun Board in connection with the proposed merger involving Vivint Solar and Sunrun. On July 6, 2020, Credit Suisse rendered its oral opinion to the Sunrun Board (which was subsequently confirmed by delivery of Credit Suisse’s written opinion dated as of the same date) to the effect that, as of July 6, 2020, and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse and referred to in such opinion, the exchange ratio set forth in the merger agreement was fair, from a financial point of view, to Sunrun.

Credit Suisse’s opinion was directed to the Sunrun Board, and only addressed the fairness, from a financial point of view, to Sunrun of the exchange ratio set forth in the merger agreement and did not address any other aspect or implication of the merger. The summary of Credit Suisse’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, a copy of which is attached as Annex B to this joint proxy statement/prospectus and which is incorporated herein by reference. Credit Suisse’s written opinion sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse in connection with the preparation of its opinion. However, neither Credit Suisse’s opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus is intended to be, and they do not constitute, advice or a recommendation to any holder of Sunrun common stock or Vivint Solar common stock as to how such holder should vote or act with respect to any matter relating to the merger.

In arriving at its opinion, Credit Suisse:

 

   

reviewed execution copies of (i) the merger agreement, (ii) the Vivint Solar support agreement, and (iii) the Sunrun support agreement;

 

   

reviewed certain publicly available business and financial information relating to Vivint Solar and Sunrun;

 

   

reviewed certain other information relating to Vivint Solar and Sunrun, including (i) certain forward-looking financial information relating to Vivint Solar prepared by the management of Vivint Solar, which, along with other such information, is referred to in this joint proxy statement/prospectus as the “April update”, (ii) financial forecasts and assumptions relating to Vivint Solar prepared by the management of Sunrun, including certain normalized terminal year projections and an estimate of the perpetuity growth rate thereafter for a portion of Vivint Solar’s business and (iii) financial forecasts and assumptions relating to Sunrun prepared by the management of Sunrun, including certain normalized terminal year projections and an estimate of the perpetuity growth rate thereafter for a portion of Sunrun’s business, which, together with the financial forecasts and assumptions relating to Vivint Solar prepared by the management of Sunrun, are referred to in this joint proxy statement/prospectus as the “Sunrun Long-Term Management Forecasts”; for a summary of the Sunrun Long-Term Management Forecasts, see “—Certain Sunrun Unaudited Prospective Financial Information” beginning on page 126 of this joint proxy statement/prospectus;

 

   

discussed the businesses and prospects of Vivint Solar and Sunrun with the management of each of Vivint Solar and Sunrun, and certain of their respective representatives and affiliates;

 

   

reviewed estimates prepared by Sunrun’s management with respect to the cost savings, synergies and other pro forma effects of the merger, including the costs and capital necessary to achieve such cost

 

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savings, synergies and other pro forma effects, anticipated by Sunrun’s management to result from the merger (referred to in this joint proxy statement/prospectus as the “estimated synergies”; for a summary of the estimated synergies, see “—Certain Estimated Synergies” beginning on page 136 of this joint proxy statement/prospectus);

 

   

considered certain financial and stock market data of Vivint Solar and Sunrun, and compared that data with similar data for other companies with publicly traded equity securities in businesses Credit Suisse deemed similar to those of Vivint Solar and Sunrun; and

 

   

considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which Credit Suisse deemed relevant.

In connection with its review, Credit Suisse did not independently verify any of the foregoing information, and, with the consent of the Sunrun Board, Credit Suisse assumed and relied upon such information being complete and accurate in all respects material to its analyses and opinion. With respect to the Sunrun Long-Term Management Forecasts, Credit Suisse was advised by the management of Sunrun and assumed with the consent of the Sunrun Board, that such forecasts had been reasonably prepared in good faith on bases reflecting the best available estimates and judgments at the time of preparation of the management of Sunrun as to the future financial performance of Vivint Solar and Sunrun, respectively. With respect to the estimated synergies, Credit Suisse was advised by the management of Sunrun, and Credit Suisse assumed with the consent of the Sunrun Board, that they were reasonably prepared in good faith on bases reflecting the best available estimates and judgments at the time of preparation of the management of Sunrun as to the potential cost savings, synergies and other pro forma effects of the merger, net of costs and capital necessary to achieve such cost savings, synergies and other pro forma effects, estimated to result from the merger and Credit Suisse assumed that the estimated synergies will be realized in the amounts and at the times indicated thereby. At the direction of the Sunrun Board, Credit Suisse assumed that the Sunrun Long-Term Management Forecasts and the estimated synergies are a reasonable basis upon which to evaluate Vivint Solar, Sunrun and the merger and, at the direction of the Sunrun Board, Credit Suisse relied upon the Sunrun Long-Term Management Forecasts and the estimated synergies for purposes of its analyses and opinion. Credit Suisse expressed no view or opinion with respect to the April update, the Sunrun Long-Term Management Forecasts or the estimated synergies, or the assumptions and methodologies upon which they were based. Credit Suisse assumed, with the consent and at the direction of the Sunrun Board, that neither Vivint Solar nor Sunrun would be cash taxpayers in the foreseeable future, and therefore, with the consent and at the direction of the Sunrun Board, Credit Suisse did not take into account any value that may be attributable to Vivint Solar’s or Sunrun’s net operating loss tax carryforwards, and Credit Suisse did not analyze and expressed no opinion or view as to the value of any such net operating loss tax carryforwards with respect to either Vivint Solar or Sunrun, for purposes of its analyses or opinion.

For purposes of its analyses and opinion, Credit Suisse was advised and Credit Suisse assumed, the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Credit Suisse also assumed, with the consent of the Sunrun Board, that, in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the merger, no modification, delay, limitation, restriction or condition would be imposed that would have an adverse effect on Vivint Solar, Sunrun, or the contemplated benefits of the merger. In addition, for purposes of its analyses and opinion, Credit Suisse assumed, with the consent of the Sunrun Board, that the merger and any related transactions will be consummated in compliance with all applicable laws and regulations and in accordance with the terms of the merger agreement without waiver, modification or amendment of any term, condition or agreement thereof that would be material to Credit Suisse’s analyses or opinion. In addition, Credit Suisse was not requested to make, and did not make, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Vivint Solar or Sunrun, nor was Credit Suisse furnished with any such evaluations or appraisals. With the consent of the Sunrun Board, Credit Suisse further assumed that the final form of the merger agreement, the Vivint Solar support agreement and the Sunrun support agreement, when executed by the parties thereto, would conform to the drafts reviewed by Credit Suisse in all respects material to its analyses and opinion.

 

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Credit Suisse’s opinion addressed only the fairness, from a financial point of view, to Sunrun of the exchange ratio set forth in the merger agreement, and did not address any other aspect or implication of the merger or any aspect or implication of any agreement, arrangement or understanding entered into in connection therewith or otherwise, including, without limitation, the Vivint Solar support agreement, the Sunrun support agreement, the form or structure of the merger and the fairness of the amount or nature of, or any other aspect relating to, any compensation or consideration to be received or otherwise payable to any officers, directors, employees, security holders or affiliates of any party to the merger, or class of such persons, relative to the exchange ratio or otherwise. Furthermore, Credit Suisse did not express any advice or opinion regarding matters that require legal, regulatory, accounting, insurance, intellectual property, tax, environmental, executive compensation or other similar professional advice. Credit Suisse assumed that Sunrun had or would obtain such advice or opinions from the appropriate professional sources. The issuance of Credit Suisse’s opinion was approved by Credit Suisse’s authorized internal committee.

Credit Suisse’s opinion was necessarily based on information made available to Credit Suisse as of the date of its opinion and upon financial, economic, market and other conditions as they existed and could be evaluated on the date of its opinion. As the Sunrun Board was aware, the credit, financial and stock markets had been experiencing unusual volatility and Credit Suisse expressed no opinion or view as to any potential effects of such volatility on Sunrun, Vivint Solar or the merger. In addition, as the Sunrun Board was aware, the Sunrun Long-Term Management Forecasts and the estimated synergies reflect certain assumptions regarding the residential solar industry that are subject to significant uncertainty and volatility, both inherent to the industry and as exacerbated by current market conditions, and that, if different than assumed, could have a material impact on Credit Suisse’s analyses and opinion. Credit Suisse did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to Credit Suisse’s attention after the date of its opinion. Credit Suisse’s opinion did not address the relative merits of the merger as compared to alternative transactions or strategies that might be available to Sunrun, nor did it address the underlying business decision of the Sunrun Board or Sunrun to proceed with or effect the merger. Credit Suisse did not express an opinion as to what the value of shares of Sunrun common stock actually would be when issued pursuant to the merger or the price or range of prices at which Vivint Solar common stock or Sunrun common stock may be purchased, sold or otherwise transferred at any time.

Credit Suisse’s opinion and analyses were for the information of the Sunrun Board (in its capacity as such) in connection with its consideration of the merger and were among many factors considered by the Sunrun Board in evaluating the merger. Credit Suisse’s opinion did not constitute a recommendation to the Sunrun Board with respect to the merger or advice or any recommendation to any security holder of Sunrun or Vivint Solar as to how such holder should vote or act on any matter relating to the merger. Neither Credit Suisse’s opinion nor its analyses were determinative of the exchange ratio or of the views of the Sunrun Board with respect to the merger.

In preparing its opinion to the Sunrun Board, Credit Suisse performed a variety of analyses, including those described below. The summary of Credit Suisse’s financial analyses is not a complete description of the analyses underlying Credit Suisse’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytic methods employed and the adaptation and application of those methods to the unique facts and circumstances presented. As a consequence, neither Credit Suisse’s opinion nor the analyses underlying its opinion are readily susceptible to partial analysis or summary description. Credit Suisse arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, analytic method or factor. Accordingly, Credit Suisse believes that its analyses must be considered as a whole and that selecting portions of its analyses, analytic methods and factors, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

In performing its analyses, Credit Suisse considered business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion.

 

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No other company or business used in Credit Suisse’s analyses for comparative purposes is identical to Sunrun or Vivint Solar. While the results of each analysis were taken into account in reaching its overall conclusion with respect to fairness, Credit Suisse did not make separate or quantifiable judgments regarding individual analyses. The implied valuation reference ranges indicated by Credit Suisse’s analyses are illustrative and not necessarily indicative of actual values nor predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond the control of Sunrun and Credit Suisse. Much of the information used in, and accordingly the results of, Credit Suisse’s analyses are inherently subject to substantial uncertainty.

Financial Analyses

The following is a summary of the material financial analyses performed by Credit Suisse in connection with the preparation of Credit Suisse’s opinion rendered to the Sunrun Board on July 6, 2020. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, each analysis, could create a misleading or incomplete view of Credit Suisse’s analyses.

For purposes of its analyses, Credit Suisse reviewed a number of financial metrics including:

 

   

equity value, which is generally the value of the relevant company’s outstanding equity securities (taking into account its outstanding warrants and other convertible securities) based on the relevant company’s closing stock price (in the case of Vivint Solar, the outstanding options taken into account for this purpose and for the purpose of calculating implied equity value reference ranges per Vivint Solar share assumed full vesting of all of the hypothetical stock options outstanding under the Vivint Solar LTIP Plans, with an exercise price of $1.00 per share); and

 

   

Net Earning Assets (“NEA”), Estimated Net Retained Value (“NRV”) and Estimated Net Contracted Customer Value (“NCV”), which are non-GAAP financial metrics disclosed by, respectively, Sunrun, Vivint Solar and Sunnova Energy International Inc. (a company with publicly traded equity securities Credit Suisse deemed similar to Sunrun and Vivint Solar in one or more respects and therefore considered in the selected public companies analyses described below), and which generally represent the estimated net present value of cash flows that are currently contracted or projected to be contracted, subject to certain adjustments applied by each respective company, such as subtracting debt and adding cash and cash equivalents, and to certain other adjustments applied by Credit Suisse as further described below. Each of NEA, NRV and NCV, as applicable to each respective company and as so adjusted, is referred to in this joint proxy statement/prospectus as “net retained value”.

Selected Public Companies Analyses

Credit Suisse considered certain financial data for Sunrun and Vivint Solar, as well as Sunnova Energy International Inc., a company with publicly traded equity securities Credit Suisse deemed similar to Sunrun and Vivint Solar in one or more respects. For purposes of the selected public companies analyses, Credit Suisse used the prices of their common stock as of July 2, 2020, the second to last full trading day prior to the announcement of the merger. The financial data for the selected public companies reviewed included:

 

   

equity value as of July 2, 2020;

 

   

net retained value as of March 31, 2020, the most recent date for which such information was publicly available. For purposes of calculating net retained value: Credit Suisse (i) assumed that, with respect to future customer renewals of operating assets after contract expiration and through the remainder of the useful life of such assets, such renewals would result in the retention of 50% of the potential aggregate value from customers at the full contractual rate as in effect at the end of the initial contractual term

 

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(such assumption is referred to in this joint proxy statement/prospectus as “assumed 50% renewals” or “assuming 50% renewals”); (ii) for Sunrun, excluded Sunrun’s $101 million upward pro forma debt adjustment for safe harboring activity, subtracted Sunrun’s $238 million of recourse debt, and added Sunrun’s $366 million of unrestricted and restricted cash; (iii) for Vivint Solar, added $24 million of unamortized debt issuance costs; and (iv) for Sunnova Energy International Inc., excluded Sunnova Energy International Inc.’s $135 million upward adjustment for inventory receivables and $182 million upward adjustment for construction in progress, added Sunnova Energy International Inc.’s $130 million of net cash raised from its convertible note issuance in June 2020, and treated convertible notes on an as-converted to equity basis; and

 

   

equity value as a multiple of net retained value as of March 31, 2020.

The financial data and trading multiples shown below for the selected public companies were calculated using publicly available common stock prices and company disclosures as of July 2, 2020 for equity value and net retained value as of March 31, 2020.

 

Selected Public Companies

   Equity Value
($ in millions)
     Net Retained Value
($ in millions)
     Equity Value /
Net Retained
Value
 

Sunrun

   $ 2,663      $ 1,109        2.40x  

Vivint Solar

   $ 1,372      $ 990        1.39x  

Sunnova Energy International Inc.

   $ 1,769      $ 910        1.94x  

Credit Suisse then applied a selected range, based on its professional judgment and experience, of multiples to the net retained value of Sunrun and Vivint Solar, as applicable, as of March 31, 2020, to derive implied equity value reference ranges for Sunrun and Vivint Solar.

Selected Public Companies Analysis—Sunrun

With respect to Sunrun, the financial data for the selected public companies reviewed consisted of equity value as a multiple of net retained value.

Taking into account the results of the selected public companies analysis and based on its professional judgment and experience, Credit Suisse applied a multiple range of 2.00x to 2.50x to Sunrun’s net retained value as of March 31, 2020. The selected public companies analysis indicated an implied equity value reference range per Sunrun share of $16.75 to $20.80.

Selected Public Companies Analysis—Vivint Solar

With respect to Vivint Solar, the financial data for the selected public companies reviewed consisted of equity value as a multiple of net retained value.

Taking into account the results of the selected public companies analysis and based on its professional judgment and experience, Credit Suisse applied a multiple range of 1.25x to 1.75x to Vivint Solar’s net retained value as of March 31, 2020. The selected public companies analysis indicated an implied equity value reference range per Vivint Solar share of $9.10 to $12.66.

Levered Sum-of-the-Parts (SOTP) Discounted Cash Flow Analyses

Credit Suisse performed a “sum-of-the-parts analysis” for each of Sunrun and Vivint Solar by analyzing the implied equity value of each of Sunrun and Vivint Solar by calculating the sum of (i) the aggregate present values of the levered discounted cash flows of such company’s two operating entities: (x) the portion of its business that originates, designs and installs solar energy systems (respectively, the “Sunrun DevCo” and the “Vivint Solar DevCo”, and either, a “DevCo”) and (y) the portion of its business that holds the portfolio of installed assets and derives its long-term value from residual cash flows generated thereby (respectively, the

 

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“Sunrun AssetCo” and the “Vivint Solar AssetCo”, and either, an “AssetCo”), and (ii) the amount of such company’s unrestricted cash (excluding certain cash within tax equity funds) for the fiscal year ending December 31, 2020. Credit Suisse valued (i) each DevCo based on financial forecasts of each DevCo’s levered free cash flows for the fiscal years ending December 31, 2021 through 2024 and (ii) each AssetCo based on financial forecasts of each AssetCo’s levered free cash flows for the fiscal years ending December 31, 2021 through 2055, in each case prepared and provided to Credit Suisse by Sunrun management for both Sunrun’s and Vivint Solar’s AssetCo’s and DevCo’s and, in each case, as set forth in the Sunrun Long-Term Management Forecasts below, and in each case assuming 50% renewals. AssetCo’s cash flows were derived from the Sunrun AssetCo Projected Levered Cash Flow Scenario and Vivint Solar AssetCo Projected Levered Cash Flow Scenario metrics, both of which are non-GAAP metrics defined as post-tax net cash flow generated from each company’s existing fleet of in-service assets, less cash distributions to tax equity investors, less non-recourse debt service, less cash distributions to non-recourse cash equity investors, and includes the following financing and operating assumptions: (1) that there is no subordinated debt refinancing over the next 35 years, (2) there are customer defaults, (3) conservative system production performance adjustments, (4) no contracted or uncontracted grid service revenue, (5) absence of exercising options for tax equity buy-outs when available, (6) absence of exercising options for lease terminations when available and (7) exclusion of certain state-level subsidy program payments, which could generate material near-term cash flows, due to the difficulty in forecasting the timing of such program payments. Furthermore, Credit Suisse assumed at the direction of the Sunrun Board that neither Sunrun nor Vivint Solar will be cash taxpayers in the foreseeable future, and therefore, at the direction of the Sunrun Board, Credit Suisse did not take into account any value that may be attributable to either company’s net operating loss tax carryforwards and did not analyze and expressed no opinion or view as to the value of any such net operating loss tax carryforwards with respect to either company for purposes of its analyses or opinion.

Levered Sum-of-the-Parts (SOTP) Discounted Cash Flow Analysis—Sunrun

Credit Suisse performed a discounted cash flow analysis with respect to Sunrun to estimate the net present value of the projected levered free cash flows of Sunrun on a standalone basis, based on the Sunrun Long-Term Management Forecasts. For purposes of the discounted levered cash flow analysis with respect to the Sunrun DevCo, Credit Suisse (i) estimated the residual value of the Sunrun DevCo at the end of the projection period, which is referred to in this joint proxy statement/prospectus as the “terminal value”, at the direction of the Sunrun Board by adjusting the Sunrun DevCo’s levered free cash flow as of December 31, 2024 to exclude non-recurring items projected to occur in the fiscal year ending on such date and applying a perpetuity growth rate range of 4.0% to 5.0% for such terminal year levered free cash flows, and (ii) applied discount rates ranging from 10.5% to 13.0%, in each case, based on its professional judgment and experience.

For purposes of the discounted levered cash flow analysis with respect to the Sunrun AssetCo, Credit Suisse assumed 50% renewals at the direction of the Sunrun Board and applied discount rates ranging from 9.0% to 11.0% based on its professional judgment and experience.

The discounted levered cash flow analysis indicated an implied equity value reference range per Sunrun share on a standalone basis of $16.57 to $25.07.

Levered Sum-of-the-Parts (SOTP) Discounted Cash Flow Analysis—Vivint Solar

Credit Suisse performed a discounted cash flow analysis with respect to Vivint Solar to estimate the net present value of the projected levered free cash flows of Vivint Solar on a standalone basis, based on the Sunrun Long-Term Management Forecasts. For purposes of the discounted levered cash flow analysis with respect to the Vivint Solar DevCo, Credit Suisse (i) estimated terminal value at the direction of the Sunrun Board by adjusting the Vivint Solar DevCo’s levered free cash flow as of December 31, 2024 to exclude non-recurring items projected to occur in the fiscal year ending on such date and applying a perpetuity growth rate range of 4.0% to 5.0% for such terminal year levered free cash flows, and (ii) applied discount rates ranging from 10.5% to 13.0%, in each case, based on its professional judgment and experience.

 

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For purposes of the discounted levered cash flow analysis with respect to the Vivint Solar AssetCo, Credit Suisse assumed 50% renewals at the direction of the Sunrun Board and applied discount rates ranging from 9.0% to 11.0% based on its professional judgment and experience.

The discounted levered cash flow analysis indicated an implied equity value reference range per Vivint Solar share on a standalone basis of $8.42 to $11.33.

Implied Exchange Ratio Analyses

Credit Suisse performed certain implied exchange ratio analyses in which Credit Suisse calculated implied exchange ratio reference ranges based on the results of the selected public companies and levered SOTP discounted cash flow analyses relating to Sunrun and Vivint Solar described above.

Credit Suisse also performed an implied exchange ratio analysis based on the results of the levered sum-of-the-parts discounted cash flow analyses including the present value of the estimated synergies on a pro forma basis after giving effect to the consummation of the merger, with respect to both (i) all estimated synergies and (ii) only the cost synergies included in the estimated synergies. In calculating the present value of the estimated synergies, Credit Suisse, based on its professional judgment and experience, (i) applied a perpetuity growth rate range of 0.0% to 2.0% for terminal year levered free cash flows for the estimated cost synergies and (ii) applied discount rates ranging from 9% to 13.0% for each of the estimated synergies. For purposes of the implied exchange ratio analysis, Credit Suisse assumed that all of the estimated synergies were allocated to Vivint Solar, which resulted in an implied equity value reference range per Vivint Solar share of $13.76 to $18.96 for all estimated synergies and $12.36 to $17.55 for the cost synergies included in the estimated synergies.

The low-ends of the standalone implied exchange ratio reference ranges were calculated by dividing (i) the low-end of the implied equity value per share reference ranges derived for Vivint Solar as described under the Vivint Solar selected public companies analysis and the Vivint Solar levered sum-of-the-parts discounted cash flow analysis, in each case, by (ii) the high-end of the implied equity value per share reference ranges derived for Sunrun as described under the Sunrun selected public companies analysis and Sunrun levered sum-of-the-parts discounted cash flow analysis, respectively. The low-ends of the implied exchange ratio reference ranges using the estimated synergies were calculated by dividing (i) the low-ends of the implied equity value per share reference ranges derived for Vivint Solar as described above in this subsection with respect to the estimated synergies and the cost synergies included in the estimated synergies, respectively, in each case, by (ii) the high-end of the implied equity value per share reference ranges derived for Sunrun as described above under the Sunrun levered sum-of-the-parts discounted cash flow analysis. The high-ends of the standalone implied exchange ratio reference ranges were calculated by dividing (i) the high-end of the implied equity value per share reference ranges derived for Vivint Solar as described above under the Vivint Solar selected public companies analysis and the Vivint Solar levered sum-of-the-parts discounted cash flow analysis, in each case, by (ii) the low-end of the implied equity value per share reference ranges derived for Sunrun as described above under the Sunrun selected public companies analysis and the Sunrun levered sum-of-the-parts discounted cash flow analysis, respectively. The high-ends of the implied exchange ratio reference ranges using the estimated synergies were calculated by dividing (i) the high-ends of the implied equity value per share reference ranges derived for Vivint Solar as described above in this subsection with respect to the estimated synergies and the cost synergies included in the estimated synergies, respectively, in each case, by (ii) the low-end of the implied equity value per share reference ranges derived for Sunrun as described above under the Sunrun levered sum-of-the-parts discounted cash flow analysis. These analyses resulted in the following implied exchange ratio reference ranges, as compared to the exchange ratio of 0.55x provided for in the merger agreement:

 

     Implied Exchange Ratio  

Selected Public Companies Analyses

     0.438x – 0.756x  

Levered SOTP Discounted Cash Flow Analyses

     0.336x – 0.684x  

Levered SOTP Discounted Cash Flow Analyses—Including Estimated Synergies

     0.549x – 1.144x  

Levered SOTP Discounted Cash Flow Analyses—Including Only Estimated Cost Synergies

     0.493x – 1.060x  

 

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Other Information

Credit Suisse also observed certain additional factors that were not considered part of Credit Suisse’s financial analyses with respect to its opinion but were referenced for informational purposes, including, among other things, the following:

 

   

historical closing prices during the 52-week period ended July 2, 2020, the second to last full trading day prior to the announcement of the merger, for Sunrun shares and Vivint Solar shares, which ranged from approximately $8.36 to $23.40 per share and $3.29 to $12.85 per share, respectively; and

 

   

share price targets for Sunrun and Vivint Solar in recently published, publicly available Wall Street research analyst reports, as of July 2, 2020, the second to last full trading day prior to the announcement of the merger, which ranged from approximately $19.00 to $30.00 per share and $10.00 to $15.00 per share, respectively.

Other Matters

Sunrun retained Credit Suisse as its financial advisor in connection with the merger based on Credit Suisse’s qualifications, experience and reputation as an internationally recognized investment banking and financial advisory firm. Credit Suisse will become entitled to receive a transaction fee of $14 million, $1.5 million of which became payable upon the rendering of Credit Suisse’s opinion and the balance of which will become payable upon the closing of the merger. In addition, Sunrun has agreed to reimburse Credit Suisse for certain of its expenses and indemnify Credit Suisse and certain related persons and entities for certain liabilities and other items arising out of or related to its engagement.

Credit Suisse and its affiliates have in the past provided and currently are providing investment banking and other financial advice and services to Sunrun and its affiliates for which advice and services Credit Suisse and its affiliates have received or expect to receive compensation, including among other things, during the past two years, having participated in certain offerings of debt securities for Sunrun and having acted as a counterparty to Sunrun or its affiliates in various derivatives and tax equity financing transactions. Credit Suisse and its affiliates have in the past provided and currently are providing investment banking and other financial advice and services to Vivint Solar and its affiliates for which advice and services Credit Suisse and its affiliates have received and expect to receive compensation, including among other things, during the past two years, having participated in certain offerings of equity and debt securities for Vivint Solar and in various derivatives transactions of Vivint Solar or its affiliates. Credit Suisse and its affiliates have in the past provided and currently are providing investment banking and other financial advice and services to Blackstone, its affiliates and portfolio companies of investment funds affiliated or associated with Blackstone for which advice and services Credit Suisse and its affiliates have received or expect to receive compensation, including among other things, during the past two years, having participated in various offerings of debt and equity securities for affiliates and portfolio companies of investment funds affiliated or associated with Blackstone and having acted as financial advisor to affiliates of Blackstone in connection with their acquisition of the remaining equity interests in Tallgrass Energy, LP completed in April 2020. Credit Suisse is also a lender to Sunrun, Vivint Solar and Blackstone (or one or more of their respective affiliates). Credit Suisse and its affiliates may in the future provide investment banking and other financial advice and services to Sunrun, Vivint Solar, Blackstone and their respective affiliates for which advice and services Credit Suisse and its affiliates would expect to receive compensation. In the two-year period prior to the date of the opinion, Credit Suisse has been paid (i) aggregate fees of approximately $11.1 million by Sunrun and its subsidiaries for investment banking and securitized product services unrelated to its engagement in connection with the merger, (ii) aggregate fees of approximately $1.0 million by Vivint Solar and its subsidiaries for investment banking and securitized product services unrelated to its engagement in connection with the merger and (iii) aggregate fees of approximately $88.3 million by Blackstone, its affiliates and portfolio companies of investment funds affiliated or associated with Blackstone for investment banking and securitized product services unrelated to its engagement in connection with the merger.

 

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Credit Suisse is a full service securities firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial advice and services. In the ordinary course of business, Credit Suisse and its affiliates may acquire, hold or sell, for its and its affiliates’ own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of Sunrun, Vivint Solar, Blackstone and their respective affiliates, and any other company that may be involved in the merger, as well as provide investment banking and other financial advice and services to such companies and their affiliates.

Opinions of Vivint Solar’s Financial Advisors

Opinion of Morgan Stanley

Vivint Solar retained Morgan Stanley to act as one of its financial advisors to the Vivint Solar Board in connection with the proposed merger of Vivint Solar and Sunrun. The Vivint Solar Board selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of the residential solar industry, and its knowledge of Vivint Solar’s business and affairs. As part of this engagement, the Vivint Solar Board requested that Morgan Stanley evaluate the fairness, from a financial point of view, of the exchange ratio provided for pursuant to the merger agreement. On July 6, 2020, Morgan Stanley rendered an oral opinion, which was subsequently confirmed by delivery of a written opinion dated July 6, 2020, that as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in its written opinion, the exchange ratio was fair from a financial point of view to the holders of shares of Vivint Solar common stock (other than the excluded shares).

The full text of the written opinion of Morgan Stanley, dated as of July 6, 2020, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this joint proxy statement/prospectus as Annex C and is incorporated herein by reference. The description of Morgan Stanley’s written opinion set forth below is qualified in its entirety by reference to the full text of such written opinion. You are encouraged to read the entire opinion carefully and in its entirety. Morgan Stanley’s opinion was rendered for the benefit of the Vivint Solar Board, in its capacity as such, and addressed only the fairness from a financial point of view of the exchange ratio provided for pursuant to the merger agreement to the holders of shares of Vivint Solar common stock (other than the excluded shares) as of the date of the opinion. Morgan Stanley’s opinion did not address other aspects of the Merger or other transactions contemplated by the Merger Agreement, including the prices at which shares of Sunrun Common Stock would trade at any time in the future, the relative merits of the merger as compared to other business or financial strategies that might be available to Vivint Solar or any compensation or compensation agreements arising from (or relating to) the merger which benefit any officer, director or employee of Vivint Solar, or any class of such persons. The opinion was addressed to, and rendered for the benefit of, the Vivint Solar Board and was not intended to, and does not, constitute advice or a recommendation to any holder of shares of Vivint Solar common stock or any holder of shares of Sunrun common stock as to how to vote or act on any matter with respect to the merger or related transactions or any other action with respect to the transactions contemplated by the merger agreement, including the merger.

In connection with rendering its opinion, Morgan Stanley, among other things:

 

   

reviewed certain publicly available financial statements and other business and financial information of Vivint Solar and Sunrun, respectively;

 

   

reviewed certain internal financial statements and other financial and operating data concerning Vivint Solar and Sunrun, respectively;

 

   

reviewed certain financial projections prepared by the managements of Vivint Solar and Sunrun, respectively;

 

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reviewed information relating to certain strategic, financial and operational benefits anticipated from the merger, prepared by McKinsey & Co. for Sunrun, provided by Sunrun (which we refer to in this “—Opinions of Vivint Solar’s Financial Advisors—Opinion of Morgan Stanley” section as the “Synergies Information”), and included in Morgan Stanley’s analysis at the direction of the management of Vivint Solar;

 

   

discussed the past and current operations and financial condition and the prospects of Vivint Solar, including the Synergies Information, with senior executives of Vivint Solar;

 

   

discussed the past and current operations and financial condition and the prospects of Sunrun, including the Synergies Information, with senior executives of Sunrun;

 

   

reviewed the pro forma impact of the merger on Sunrun’s cash flow, consolidated capitalization and certain financial ratios;

 

   

reviewed the reported prices and trading activity for the Vivint Solar common stock and the Sunrun common stock;

 

   

compared the financial performance of Vivint Solar and Sunrun and the prices and trading activity of the Vivint Solar common stock and the Sunrun common stock with that of certain other publicly traded companies comparable with Vivint Solar and Sunrun, respectively, and their securities;

 

   

participated in certain discussions and negotiations among representatives of Vivint Solar and Sunrun and their financial advisors and in certain discussions among representatives of Vivint Solar and Sunrun and their legal advisors;

 

   

reviewed the merger agreement and certain related documents; and

 

   

performed such other analyses, reviewed such other information and considered such other factors as Morgan Stanley deemed appropriate.

In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied, or otherwise made available to Morgan Stanley by Vivint Solar and Sunrun, and formed a substantial basis for its opinion. With respect to the financial projections, including the Synergies Information, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best available estimates and judgments of the managements of Vivint Solar and Sunrun as of the date of their preparation of the future financial performance of Vivint Solar and Sunrun. Morgan Stanley relied upon, without independent verification, the assessment by the managements of Vivint Solar and Sunrun of: (i) the Synergies Information; (ii) the timing and risks associated with the integration of Vivint Solar and Sunrun; (iii) their ability to retain key employees of Vivint Solar and Sunrun, respectively and (iv) the validity of, and risks associated with, Vivint Solar and Sunrun’s existing and future technologies, intellectual property, products, services and business models. In addition, Morgan Stanley assumed that the merger would be consummated in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any material terms or conditions, including, among other things, that the merger would be treated as a tax-free reorganization, pursuant to Section 368(a) of the Code, and that the definitive merger agreement would not differ in any material respect from the draft thereof furnished to Morgan Stanley. Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed merger, no delays, limitations, conditions or restrictions would be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the proposed merger. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of Sunrun and Vivint Solar and their legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of Vivint Solar’s officers, directors or employees, or any class of such persons, relative to the exchange ratio. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of Vivint Solar or Sunrun, nor was Morgan Stanley furnished with any such valuations or appraisals. Morgan Stanley’s opinion was necessarily

 

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based on financial, economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of, July 6, 2020. Events occurring after July 6, 2020 may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion.

Summary of Financial Analyses

The following is a summary of the material financial analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion dated July 6, 2020. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with its opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. In connection with arriving at its opinion, Morgan Stanley considered all of its analyses as a whole and did not attribute any particular weight to any analysis described below. Considering any portion of such analyses and factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion. Some of these summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Furthermore, mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using the data referred to below.

In performing the financial analyses summarized below and in arriving at its opinion, Morgan Stanley utilized and relied upon certain financial forecasts provided by the managements of Vivint Solar and Sunrun and referred to below. For further information regarding the financial forecasts, see the section entitled “—Certain Vivint Solar Unaudited Prospective Financial Information” beginning on page 131 of this joint proxy statement/prospectus.

Morgan Stanley’s analysis did not include a comparable transactions analysis because, upon the application of its professional judgment and experience, Morgan Stanley determined that there were no relevant comparable transactions.

On July 6, 2020, Vivint Solar and Sunrun entered into the merger agreement pursuant to which each share of Vivint Solar common stock (other than the excluded shares) would be exchanged for 0.55 shares of Sunrun common stock. This exchange ratio represented an implied price of $11.74 per share of Vivint Solar common stock, based on the closing price per share of Sunrun common stock of $21.34 on July 6, 2020. The closing price per share of Vivint Solar common stock was $10.63 on July 6, 2020.

Analyses Related to Vivint Solar

Trading Comparables Analysis

Morgan Stanley performed a trading comparables analysis, which is intended to provide an implied value of a company by comparing it to similar companies that are publicly traded. Morgan Stanley reviewed and compared publicly available financial information for Vivint Solar with comparable publicly available financial information for Sunrun and Sunnova Energy International Inc. (“Sunnova”). Morgan Stanley reviewed certain financial information of Sunnova, a public company that shares similar business characteristics to Vivint Solar based upon Sunnova’s public filings, investor presentations and research analyst reports.

The foregoing companies were chosen based on Morgan Stanley’s knowledge of the residential solar industry and because such companies have businesses that may be considered similar to Vivint Solar’s. Although none of such companies are identical or directly comparable to Vivint Solar, these companies are publicly traded companies with operations and/or other criteria, such as lines of business, markets, business risks, growth

 

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prospects, maturity of business and size and scale of business, that for purposes of its analysis Morgan Stanley considered similar to those of Vivint Solar. The foregoing summary and underlying financial analyses involved complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the values of the companies to which Vivint Solar was compared. In evaluating comparable companies, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of Vivint Solar, including, among other things, the impact of competition on the business of Vivint Solar and the industry generally, regulatory changes, movements in commodity prices, industry growth and the absence of any adverse material change in the financial condition and prospects of Vivint Solar or the industry or in the financial markets in general.

For purposes of this analysis, Morgan Stanley analyzed:

 

   

the ratio of aggregate value (“AV”) (calculated as the market value of equity on a fully diluted basis, plus net debt, plus minority interest, plus capital and finance leases) to gross retained value (“GRV”) (calculated as net cash flows, discounted at 6.0%, expected to be received from customers pursuant to long-term customer contracts plus the value of contracted solar renewable energy certificates net of estimated cash distributions to fund investors, debt associated with forward flow facilities and estimated operating expenses for systems installed as of the measurement date) based on Vivint Solar’s “Estimated Gross Retained Value”, Sunrun’s “Gross Earning Assets” and Sunnova’s “Estimated Gross Total Customer Value” publicly reported metrics, in each case as of March 31, 2020 (“AV / GRV Ratio”); and

 

   

the ratio of equity value (“EV”) (calculated as the market value of equity on a fully diluted basis) to net retained value (“NRV”) (calculated as GRV, less recourse and non-recourse debt, plus pro forma debt adjustment for cash equity deals, plus cash and restricted cash) based on Vivint Solar’s “Net Retained Value”, Sunrun’s “Net Earning Assets” and Sunnova’s “Estimated Net Customer Value” publicly reported metrics, in each case as of March 31, 2020 (“EV / NRV Ratio”). In determining such ratios, Sunrun’s “Net Earning Assets” publicly reported metric was adjusted to include Sunrun’s cash, cash equivalents, restricted cash and recourse debt, and Sunnova’s “Estimated Net Customer Value” publicly reported metric was adjusted to exclude systems classified as “Construction in Process” in order to more closely approximate Vivint Solar’s approach to the calculation of its “Net Retained Value” publicly reported metric.

Based on its professional judgment and experience, Morgan Stanley selected representative ranges of the AV / GRV Ratio and the EV / NRV Ratio for the comparable companies, reflecting the lowest of the first quartile and the highest of the third quartile of the last two years for Vivint Solar and Sunrun, as well as Sunnova since its July 2019 initial public offering. Results of the analysis were presented as indicated in the following table:

 

Company

   Range of
AV / GRV (25th
to 75th
Percentile)
     Range of
EV / NRV (25th
to 75th
Percentile)
 

Vivint Solar

     0.94x – 1.07x        0.66x – 0.85x  

Sunrun

     1.32x – 1.44x        1.17x – 1.43x  

Sunnova

     1.10x – 1.23x        1.08x – 1.37x  

 

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Based on this analysis and its professional judgment, Morgan Stanley applied these ranges to Vivint Solar’s publicly reported GRV of $2.378 billion and Vivint Solar’s publicly reported NRV of $1.246 billion, in each case as of March 31, 2020. Based on the number of fully diluted shares outstanding of Vivint Solar common stock as of July 2, 2020 provided by the management of Vivint Solar and Vivint Solar’s publicly reported net debt as of March 31, 2020, the analysis indicated the following implied value per share ranges for Vivint Solar common stock, each rounded to the nearest $0.25:

 

Metric

   Reference
Range
     Implied Value
Per Share of
Vivint Solar
Common Stock
 

AV / GRV

     0.94x – 1.44x      $ 5.00 – $13.75  

EV / NRV

     0.66x – 1.43x      $ 6.25 – $13.25  

Levered Discounted Cash Flow Analysis

Morgan Stanley performed a pre-tax levered discounted cash flow analysis, which is intended to provide an implied value of a company by calculating the present value of the estimated future free cash flows and terminal value of such company.

Morgan Stanley first calculated the equity value of Vivint Solar’s systems installed as of December 31, 2019, referred to herein as “Vivint Solar AssetCo”, which value was calculated as the estimated levered free cash flows that management of Vivint Solar forecasted Vivint Solar to generate during calendar years 2020 through 2050 from such systems, plus current unrestricted excess cash from the Vivint Solar holding company loan facility financing announced on June 2, 2020. Such cash flows were then discounted to present value as of June 30, 2020 using discount rates ranging from 9.3% to 11.3%, which discount rates were selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect a cost of equity for Vivint Solar (based on the capital asset pricing model).

Morgan Stanley then calculated the equity value of Vivint Solar’s new systems forecasted to be installed from January 1, 2020 through 2024, referred to herein as “Vivint Solar DevCo”, which value was calculated as the estimated present value of the levered cash flows that management of Vivint Solar forecasted Vivint Solar to generate during calendar years 2020 through 2024 from such systems, plus a terminal equity value based on a one-year forward EBITDA multiple. Morgan Stanley then estimated the terminal value of Vivint Solar DevCo at the end of the forecast period by using an EBITDA trading multiple ranging from 12.0x to 16.0x applied to Vivint Solar DevCo’s EBITDA in 2025 based on the forecasts and assumptions provided by Vivint Solar’s management, less the Vivint Solar debt in the terminal year based on the forecasts prepared by Vivint Solar’s management. The terminal value one-year forward EBITDA trading multiple range was selected based upon the application of Morgan Stanley’s professional judgment and experience and the two-year average one-year forward EBITDA trading multiple for Ameresco, Inc., Enphase Energy, Inc. and SolarEdge Technologies, Inc., which companies were selected because they are publicly traded companies similar to Vivint Solar DevCo. Such cash flows and terminal values were then discounted to present value as of June 30, 2020 using discount rates ranging from 9.3% to 11.3%, which discount rates were selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect a cost of equity calculation for Vivint Solar (based on the capital asset pricing model).

 

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The resulting ranges of equity values for Vivint Solar AssetCo and Vivint Solar DevCo were added together to calculate a range of consolidated equity values for Vivint Solar. Morgan Stanley then divided the range of consolidated equity values for Vivint Solar by the number of fully diluted shares outstanding of Vivint Solar common stock as of July 2, 2020 provided by the management of Vivint Solar, to derive an implied value per share range. This analysis indicated the following range, each rounded to the nearest $0.25:

 

Levered Discounted Cash Flow

   Implied Value
Per Share of
Vivint Solar
Common Stock
 

As of June 30, 2020

   $ 5.50 – $8.75  

Historical Trading Range

For reference only and not as a component of its fairness analysis, Morgan Stanley reviewed the trading prices of Vivint Solar common stock over various periods ended on July 2, 2020 (the second to last full trading day prior to the meeting of the Vivint Solar Board to declare the advisability of the merger agreement and the transactions contemplated thereby, including the merger, and to approve the merger agreement and the consummation of the transactions contemplated thereby). For each of the periods reviewed, Morgan Stanley observed the relevant range of high and low trading prices, each rounded to the nearest $0.25:

 

Period Ending July 2, 2020

   Trading Price
Range of Vivint
Solar Common
Stock
 

Last 12 Months

   $ 3.25 – $12.75  

Last 30 Trading Days

   $ 7.00 – $10.25  

Discounted Equity Research Analysts’ Future Price Targets

For reference only and not as a component of its fairness analysis, Morgan Stanley reviewed future public market trading price targets for Vivint Solar common stock prepared and published by equity research analysts between March 11, 2020 and July 2, 2020 (the second to last full trading day prior to the meeting of the Vivint Solar Board to declare the advisability of the merger agreement and the transactions contemplated thereby, including the merger, and to approve the merger agreement and the consummation of the transactions contemplated thereby). These forward targets reflected each analyst’s estimate of the future public market trading price of Vivint Solar common stock and were discounted to reflect present values using Vivint Solar’s cost of equity of 10.3%, which represented the mid-point of the aforementioned 9.3% to 11.3% discount rates range, which was selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect a cost of equity calculation for Vivint Solar (based on the capital asset pricing model). Morgan Stanley compared the high and low price targets for Vivint Solar, each rounded to the nearest $0.25, to construct the price target range shown for reference.

The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for Vivint Solar common stock, and these estimates are subject to uncertainties, including the future financial performance of Vivint Solar, and future financial market conditions.

 

Research Estimates

   Price Target
Range of Vivint
Solar Common
Stock
 

As of July 2, 2020

   $ 9.00 – $13.50  

 

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Analyses Related to Sunrun

Trading Comparables Analysis

Morgan Stanley performed a trading comparables analysis, which is intended to provide an implied value of a company by comparing it to similar companies that are publicly traded. Morgan Stanley reviewed and compared publicly available financial information for Sunrun with comparable publicly available financial information for Vivint Solar and Sunnova.

The foregoing companies were chosen based on Morgan Stanley’s knowledge of the residential solar industry and because such companies have businesses that may be considered similar to Sunrun’s. Although none of such companies are identical or directly comparable to Sunrun, these companies are publicly traded companies with operations and/or other criteria, such as lines of business, markets, business risks, growth prospects, maturity of business and size and scale of business, that for purposes of its analysis Morgan Stanley considered similar to those of Sunrun. The foregoing summary and underlying financial analyses involved complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the values of the companies to which Sunrun was compared. In evaluating comparable companies, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of Sunrun, including, among other things, the impact of competition on the business of Sunrun and the industry generally, regulatory changes, movements in commodity prices, industry growth and the absence of any adverse material change in the financial condition and prospects of Sunrun or the industry or in the financial markets in general.

Based on its professional judgment and experience, Morgan Stanley selected representative ranges of the AV / GRV Ratio and the EV / NRV Ratio for the comparable companies. Results of the analysis were presented as indicated in the following table:

 

Company

   Range of
AV / GRV (25th
to 75th
Percentile)
     Range of
EV / NRV (25th
to 75th
Percentile)
 

Vivint Solar

     0.94x – 1.07x        0.66x – 0.85x  

Sunrun

     1.32x – 1.44x        1.17x – 1.43x  

Sunnova

     1.10x – 1.23x        1.08x – 1.37x  

Based on this analysis and its professional judgment, Morgan Stanley applied these ranges to Sunrun’s publicly reported GRV of $3.862 billion and Sunrun’s publicly reported estimated NRV of $1.730 billion, in each case as of March 31, 2020. Based on the number of fully diluted shares outstanding of Sunrun common stock as of July 2, 2020 provided by the management of Sunrun and Sunrun’s publicly reported net debt as of March 31, 2020, the analysis indicated the following implied value per share ranges for Sunrun common stock, each rounded to the nearest $0.25:

 

Metric

   Reference
Range
     Implied Value
Per Share of
Sunrun Common
Stock
 

AV / GRV

     0.94x – 1.44x      $        3.50 – $ 18.00  

EV / NRV

     0.66x – 1.43x      $        8.50 – $ 18.50  

Levered Discounted Cash Flow Analysis

Morgan Stanley performed a pre-tax levered discounted cash flow analysis, which is intended to provide an implied value of a company by calculating the present value of the estimated future free cash flows and terminal value of such company.

 

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Morgan Stanley first calculated the equity value of Sunrun’s systems installed as of December 31, 2019, referred to herein as “Sunrun AssetCo”, which value was calculated as the estimated levered free cash flows that Sunrun is forecasted to generate during calendar years 2020 through 2050 from such systems. Financial data used in this analysis was based on the forecast prepared by Sunrun’s management and assumptions from Vivint Solar’s management. Such cash flows were then discounted to present value as of June 30, 2020 using discount rates ranging from 9.4% to 11.4%, which discount rates were selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect a cost of equity calculation for Sunrun (based on the capital asset pricing model).

Morgan Stanley then calculated the equity value of Sunrun’s new systems forecasted to be installed from January 1, 2020 through 2024, referred to herein as “Sunrun DevCo”, which value was calculated as the estimated present value of the levered cash flows that Sunrun is forecasted to generate during calendar years 2020 through 2024 from such systems, plus a terminal equity value based on a one-year forward EBITDA multiple. Financial data used in this analysis was based on the forecast prepared by Sunrun’s management and assumptions from Vivint Solar’s management for calendar years 2020 through 2024. Morgan Stanley then estimated the terminal values of Sunrun DevCo at the end of the forecast period by using an EBITDA trading multiple ranging from 12.0x to 16.0x applied to Sunrun DevCo’s EBITDA in 2025 based on the forecast prepared by Sunrun’s management and assumptions provided by Vivint Solar’s management, less the Sunrun debt in the terminal year based on the forecast prepared by Sunrun’s management and assumptions from Vivint Solar’s management. The terminal value one-year forward EBITDA trading multiple range was selected based upon the application of Morgan Stanley’s professional judgment and experience and the two-year average one-year forward EBITDA trading multiple for Ameresco, Inc., Enphase Energy, Inc. and SolarEdge Technologies, Inc., which companies were selected because they are publicly traded companies similar to Sunrun DevCo. Such cash flows and terminal values were then discounted to present value as of June 30, 2020 using discount rates ranging from 9.4% to 11.4%, which discount rates were selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect a cost of equity calculation for Sunrun (based on the capital asset pricing model).

The resulting ranges of equity values for Sunrun AssetCo and Sunrun DevCo were added together to calculate a range of consolidated equity values for Sunrun. Morgan Stanley then divided the range of consolidated equity values for Sunrun by the number of fully diluted shares outstanding of Sunrun common stock as of July 2, 2020 provided by Sunrun management to derive an implied value per share range. This analysis indicated the following range, each rounded to the nearest $0.25:

 

Levered Discounted Cash Flow

   Implied Value
Per Share of
Sunrun
Common Stock
 

As of June 30, 2020

   $ 7.75 – $15.25  

Historical Trading Range

For reference only and not as a component of its fairness analysis, Morgan Stanley reviewed the trading prices of Sunrun common stock over various periods ended on July 2, 2020 (the second to last full trading day prior to the meeting of the Vivint Solar Board to declare the advisability of the merger agreement and the transactions contemplated thereby, including the merger, and to approve the merger agreement and the consummation of the transactions contemplated thereby). For each of the periods reviewed, Morgan Stanley observed the relevant range of high and low trading prices, each rounded to the nearest $0.25:

 

Period Ending July 2, 2020

   Trading Price
Range of Sunrun
Common Stock
 

Last 12 Months

   $ 8.25 – $23.50  

Last 30 Trading Days

   $ 15.75 – $20.00  

 

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Discounted Equity Research Analysts’ Future Price Targets

For reference only and not as a component of its fairness analysis, Morgan Stanley reviewed future public market trading price targets for Sunrun common stock prepared and published by equity research analysts as of July 2, 2020 (the second to last full trading day prior to the meeting of the Vivint Solar Board to declare the advisability of the merger agreement and the transactions contemplated thereby, including the merger, and to approve the merger agreement and the consummation of the transactions contemplated thereby). These forward targets reflected each analyst’s estimate of the future public market trading price of Sunrun common stock and were discounted to reflect present values using Sunrun’s cost of equity of 10.4%, which represented the mid-point of the aforementioned 9.4% to 11.4% discount rates range, which was selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect a cost of equity calculation for Sunrun (based on the capital asset pricing model). Morgan Stanley compared the high and low price targets for Sunrun to construct the price target range shown for reference.

The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for Sunrun common stock, and these estimates are subject to uncertainties, including the future financial performance of Sunrun, and future financial market conditions.

 

Research Estimates

   Price Target
Range of Sunrun
Common Stock
 

As of July 2, 2020

   $ 9.75 – $27.00  

Pro Forma Analyses

Relative Implied Exchange Ratio Analysis

Using the implied per share reference ranges for Vivint Solar and Sunrun indicated in the respective comparable companies analyses and levered discounted cash flow analyses described above, Morgan Stanley calculated ranges of implied exchange ratios of Vivint Solar common stock to Sunrun common stock. For reference only and not as a component of its fairness analysis, Morgan Stanley calculated implied exchange ratios of Vivint Solar common stock to Sunrun common stock based upon the historical trading and equity research analysts’ price target ranges described above. This implied exchange ratio analysis indicated the following implied exchange ratio reference ranges as compared to the exchange ratio of 0.55x provided for in the merger agreement:

 

Implied Exchange Ratio

   Low      High  

AV / GRV

     0.278x        3.929x  

EV / NRV

     0.338x        1.559x  

Levered Discounted Cash Flow

     0.361x        1.129x  

Last 12 Months

     0.138x        1.545x  

Last 30 Trading Days

     0.350x        0.651x  

Discounted Equity Research Analysts’ Future Price Targets

     0.333x        1.385x  

Trading Comparables Analysis

Morgan Stanley performed a trading comparables analysis, which is intended to provide an implied value of a company by comparing it to similar companies that are publicly traded. Morgan Stanley reviewed and compared publicly available financial information for the pro forma combined company with comparable publicly available financial information for Vivint Solar, Sunrun and Sunnova.

The foregoing companies were chosen based on Morgan Stanley’s knowledge of the residential solar industry and because such companies have businesses that may be considered similar to the pro forma combined

 

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company’s. Although none of such companies are identical or directly comparable to the pro forma combined company, these companies are publicly traded companies with operations and/or other criteria, such as lines of business, markets, business risks, growth prospects, maturity of business and size and scale of business, that for purposes of its analysis Morgan Stanley considered similar to those of the pro forma combined company. The foregoing summary and underlying financial analyses involved complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the values of the companies to which the pro forma combined company was compared. In evaluating comparable companies, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of the pro forma combined company, including, among other things, the impact of competition on the business of the pro forma combined company and the industry generally, regulatory changes, movements in commodity prices, industry growth and the absence of any adverse material change in the financial condition and prospects of the pro forma combined company or the industry or in the financial markets in general.

Based on its professional judgment and experience, Morgan Stanley selected representative ranges of the AV / GRV Ratio and the EV / NRV Ratio for the comparable companies, reflecting the lowest of the first quartile and the highest of the third quartile of the last two years for Vivint Solar and Sunrun, as well as Sunnova since its July 2019 initial public offering. Results of the analysis were presented as indicated in the following table:

 

Company

   Range of
AV / GRV (25th
to 75th
Percentile)
     Range of
EV / NRV (25th
to 75th
Percentile)
 

Vivint Solar

     0.94x – 1.07x        0.66x – 0.85x  

Sunrun

     1.32x – 1.44x        1.17x – 1.43x  

Sunnova

     1.10x – 1.23x        1.08x – 1.37x  

Based on this analysis and its professional judgment, Morgan Stanley applied these ranges to Vivint Solar and Sunrun’s combined estimated GRV of $6.240 billion and Vivint Solar and Sunrun’s combined estimated NRV of $2.976 billion, based on publicly reported metrics as of March 31, 2020. Based on the assumed number of fully diluted shares outstanding of the pro forma combined company’s common stock and Vivint Solar’s and Sunrun’s publicly reported net debt as of March 31, 2020, the analysis indicated the following implied value per share ranges for the pro forma combined company’s common stock, each rounded to the nearest $0.25: