Battery recycler Li-Cycle's stock price is taking a beating.
A day after the Canadian company delivered a sobering quarterly earnings report and outlook for its stalled Eastman Business Park expansion, its stock traded at to a low of 50 cents a share. Though rebounding to close at 66 cents on Tuesday, the stock lost half its value in a day.
Li-Cycle's stock was trading at $6.20 a year ago.
“They're on life support right now,” said Ethan Wade, senior vice president and chief development officer at Brighton Securities. “They're just trying to find a way to keep their business going.
“And the Rochester hub may not be worth continuing …. That investment may not be priority number one, when they're just trying to stay afloat.”
Li-Cycle recycles lithium-ion batteries using a patented spoke-and-hub system, breaking down and processing the material for reuse by battery manufacturers, including for electric vehicles. In Greece, the “spoke” facility at last report employed 40 people. The “hub” employed 50 and, with the expansion, was supposed to add 270 jobs. The company has referenced workforce reductions across its operations. There was no immediate word on layoffs at the local plant.
Initial estimates put the investment at $485 million. That had grown to $560 million by mid-year. Li-Cycle abruptly halted work on the project last month, saying costs had risen significantly over budget. During a Monday earnings call, officials put the new construction budget at $850 million – or as high as $1 billion when including process and warehouse buildings.
Li-Cycle claimed $300 million has been spent on the hub, to date; $390 million on the entire facility.
The company has paused projects in Canada and Europe and cut North American production. Sales are projected at $15 million this year, while the company is on track to lose $250 million.
“When your finances are in those dire straits,” Wade said, “your business can only remain in business for so long.”
The Rochester expansion was to change the overall trajectory of the business, and came with a $375 million loan commitment from the U.S. Department of Energy. The loan was to close in June, according to Li-Cycle, but has been pushed back at least twice. To date no money has been released. And Li-Cycle says it will need to obtain additional financing to meet the terms of the DOE.
The company has brought in a financial advisor to pursue “financing options and strategic alternatives.”
“Strategic alternatives is corporate speak for, ‘We have to try to find alternative methods to keep our business alive,’” Wade said.
If work resumes, the project most likely would be done in phases, with changes in production to better meet a shifting market. Yet the company also took what’s called an impairment charge of nearly $100 million, estimating the value of its unfinished Rochester hub is worth that much less.
Tuesday’s precipitous drop in Li-Cycle's stock price was expected.
“Just this year alone, their stock price is down almost 90%,” Wade said. “Now, clean green energy companies have had a challenging year this year. But some of those businesses are down 30, they're down 40, down 50%. They're not down 90%.”
Contractors continue to file liens against the McLaughlin Road property in Greece, claiming combined debts of nearly $35 million for unpaid material and labor expenses.
In an open letter to the community on Tuesday, Li-Cycle co-founders, CEO Ajay Kochhar and executive chairman Tim Johnston, struck an optimistic tone, writing:
“With favorable supply and demand dynamics driving the need for domestic sources of battery material, we continue to see significant benefits for Li-Cycle’s Spoke & Hub network, and in particular, the market need for the Rochester Hub.”
