Until about a month ago, the stock managed to rally like crazy despite the collapse in oil prices. SunEdison had spun off a YieldCo called TerraForm Power with the idea that SunEdison would build solar facilities and then sell them to Terraform, which would own the project and pay shareholders a large dividend yield.
And at that time, the market gobbled it up. Everyone seemed to love the idea of the YieldCo.
When Cramer got behind SunEdison in April, the price of oil was gaining speed rapidly and Cramer felt like the market had seen a bottom in crude. Since then it has relapsed to levels not seen since 2009.
That is not why SunEdison fell through the floor, but the latest drop in crude prices have changed the stock's backdrop.
The first stage of SunEdison's collapse had to do with its acquisition binge. For a while, the market loved it when the company did a deal—until it went one deal too far. On July 20 it acquired Vivint Solar for $2.2 billion. The next morning UBS, Credit Suisse and Deutsche Bank all raised their price targets.
Suddenly, investors became very worried about funding. Where the heck was SunEdison going to get the money to pay for all of its deals?
The second leg down came when the IPO of SunEdison's second YieldCo, TerraForm Global, occurred. The deal turned out to be a huge bust. Underwriters had planned to sell 56.6 million shares for $19 to $21 a share and raise more than $1 billion. Instead, the demand only called for 45 million shares at $15 and it raised just $675 million.
The bottom really fell out after SunEdison reported on Aug. 6, and while it delivered better than expected revenues, it had a larger than expected loss and the stock plunged 25 percent that day.
Where do investors go from here?
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Last week SunEdison announced a big partnership with Dominion, one of the largest utilities in the country. Then, on Monday, it announced a two-part capital raising plan to address funding worries.
At these levels, Cramer has to believe that the stock has been hugely stripped of risk and represents real value. On the other hand, the stock is still in free fall so buying it now would be like catching a falling knife.
"I got SunEdison wrong. The company overextended itself, continuing to make big acquisitions when it became clear that the market had turned against them…I think that long-term investors can start to gradually build a position here on the way down." Cramer said.