I understand SPAC's are considered troublemakers at the moment however I believe that this one has some substantial post merger potential.
Li-Cycle is the leading recycler of Lithium Ion batteries in North America. They plan to use a SPAC merger with Peridot Acquisition Corp. The merger will allow Li-Cycle to construct new plants to increase their production capacity by roughly 34,000% by the year 2025.
- Lithium EV batteries are a real and threat to the environment. Not only is the mining detrimental but so is the disposal of them in landfills where they leak hazardous chemicals. This makes recycling the material an necessity for a sustainable future. A famous CEO recently said that he sees a world where lithium mining will cease and that all new lithium batteries can be made with recycled lithium. Currently 98% of lead-acid batteries get recycled but only 2% of lithium is recycled. That is where with Li-Cycle comes in.
- Although Li-Cycle has a very aggressive growth plan, their future intake and offtake are already contracted through 2030. All of their growth projections show what growth could look like up to 2025, however their contracts continue into 2030.
- Something that could interrupt their growth are new players in the field. Although they have patented their technology, Tesla is working on their own lithium recycling solution, and upgrading the battery technology to give batteries a lower environmental impact. Although Tesla plans to try to cut out lithium recyclers when recycling their batteries, they currently recycle through third parties. The firm Tesla currently uses to recycle their batteries is called Redwood Materials. The process they use is reportedly very harsh on the environment as it requires burning the lithium releasing toxic gasses into the atmosphere.
- A promising catalyst for fast growth is the current Biden administration. They are looking at passing a $2T infrastructure plan which would likely include provisions for providing contracts and subsidies to make it even more profitable.
- I believe that Li-Cycles growth is significantly de-risked and makes the post merger valuation fairly inexpensive. I recommend it as a buy with a price target of $20.
Submitted April 15, 2021 at 10:57PM by gonzo-investments https://ift.tt/3eaxvf2
