Shares of residential solar company Sunnova ended their first day of trading on Thursday at $11.25, below their initial price of $12 and well south of a range of $16 to $18 put forward in mid-July.

Texas-based Sunnova raised about $170 million, with shares inching upward to $11.60 on Friday morning.

Sunnova CEO John Berger told Greentech Media that while the lowered IPO price was “not something we necessarily wanted to see,” the decline is in line with initial public offerings of other solar companies.

Sunrun, a rival rooftop solar company, experienced a drop in shares after its first day of trading, and SolarCity (now Tesla) downgraded the price of its shares prior to trading, before its stock rose 40 percent on its first day.

Sunnova is the first major U.S. solar company to go public since Sunrun in 2015, in a completely different era for the solar business.

Berger said the money raised in the IPO is a "huge shot in the arm" for the company as it looks to grow its dealer network and expand into new markets, as well as a demonstration of the changing landscape for solar.

“We’re the first solar company that went public that’s headquartered in Houston,” he said. “Now you know the energy business has really changed.”

Dense customer base "no bad thing"

One possible reason for Sunnova’s less-than-stellar showing, according to some market-watchers, is a statement that competitor Sunrun blasted out ahead of trading. Sunrun claimed that some comparisons Sunnova offered regarding “customer economics” were “misleading or inaccurate.”

Bloomberg called the disagreements “a war” between the two companies that undercut the IPO.

In a recent research note on the impending IPO, Wood Mackenzie analysts noted that Sunnova’s costs to bring on new customers range from $0.45 to $0.73 per watt, compared to more than $0.90 per watt for the company’s competitors, including Sunrun and Vivint.

In its statement, Sunrun said its analysis of Sunnova’s filings with the Securities and Exchange Commission showed that Sunnova’s customer costs are about $8,700 higher per customer than its own costs. Bloomberg suggested the document could have created confusion about Sunnova's financials.

"That document is mostly about comparing customer economics and profitability on a per-system basis between the two companies, not customer-acquisition costs specifically," said Michelle Davis, a senior solar analyst at WoodMac. "They are comparing Sunnova's and Sunrun's costs to fully originate or create a new customer, which includes everything — installation costs, customer-acquisitions costs, [general and administrative], et cetera."

Though WoodMac’s latest analysis shows that Sunrun has higher customer-acquisition costs, Davis added, “Those investments have paid off in terms of steady volume growth and increasing market share,” plus healthy financials.

“High customer-acquisition costs are not necessarily a bad thing in this industry; it just depends on how a company manages their financials and their business model. Sunnova's customer-acquisition costs should theoretically be lower given that they work with local and regional installers who rely on lower-cost sales channels. But thus far, Sunnova hasn't proven their business model can lead to profitability,” said Davis.

Berger demurred when asked to comment on the Sunrun note but said Sunnova remains “comfortable with all of our numbers,” while recognizing “it’s a never-ending process to get them better.”

And after its first day of trading, Sunnova is looking ahead.

Unlike its competitors with large installation arms, like Sunrun and Vivint, Sunnova relies on a diffuse network of local dealers to sell its product. Berger said post-IPO, Sunnova will work to bring more dealers and local installers into the fold.

Analysts suggest Sunnova needs to work on geographic diversification by expanding those partners; currently, nearly 70 percent of Sunnova's business is concentrated in three markets: New Jersey, California and Puerto Rico. Berger said the company will look to new geographies, but also plans to increase its penetration in existing markets.

“If you gave me a choice between having a dense customer base and a customer base spread all over 50 states, I would definitely take a dense customer base,” he said.

Davis also noted that Sunnova will have to improve its handling of operating costs, as the company incurred losses in 2017, 2018 and Q1 2019, while Sunrun and Vivint have shown better financial management.