Bleecker Street Research has doubled down on its two-week-old short campaign against U.S. recycling company PureCycle Technologies after an earnings call revealed production shortfalls.
In its latest presentation, Bleecker Street pointed to PureCycle’s November 8 earnings call in which the company conceded that production at its Ironton facility in Ohio had been lower than expected. The company said it had only “processed” 409,000 pounds of plastic waste, producing just 100,000 pounds of recycled polypropylene pellets, implying a less than 25% yield according to the short seller.
Furthermore, PureCycle revealed that it had planned to shut down the Ironton facility for two weeks during the second-half of November to make a “multi-million dollar repair.”
In response, Bleecker Street acknowledged that factors like the war in Ukraine, COVID-19 supply chain issues and low water on the Mississippi River had likely contributed to Ironton’s operational issues, but added that in PureCycle’s “sprint into year-end, it must run at 50% of nameplate capacity in December and 100% by April to avoid default.”
“PureCycle has financed much of its facility with debt, and the terms of this debt are onerous,” the short seller stated. “If PureCycle is not able to run at 50% of nameplate capacity in December, we believe that could be the spark that lights the tinderbox of PureCycle’s debt-heavy capital structure.”
The operational concerns raised by Bleecker Street appear not to have dissuaded PureCycle’s board, with Executive Chairman Daniel Coombs purchasing 30,000 of the company’s shares, totaling $118,500, according to a November 14 regulatory filing.
PureCycle’s stock was trading at $4.29 at midday in New York, up 10.4% on the day.