re: Diving Deeper on Origin Materials?

quote:

---

Is this the first time they report actual revenue since O1 plant went live?

---

I don't think we'll see revenues reported on Origin's income statement until Q3 2023.

Their CEO has gotten more active on twitter recently and there are plans for a big mid-year update on the plans for O2. I am expecting O2 to be a dual train instead of a single train facility, but one drawback will be my guess is it'll be 2026 before it's complete instead of 2025, given the larger scale. But from a DCF perspective, O2 being dual train and one year later still adds ~$300-400M in enterprise value at a 20% cost of equity.

Assuming this tech scales, this is the most mispriced stock I've ever seen. Management's first earnout tranche is at $15/share by June 2024, I believe they have a plan on how they attempt to get there. That's almost 4X from today's prices, in one year.

SLI has a market cap of ~$800M with I would assume less than $100M of cash on hand, while ORGN has a market cap of ~$600M with ~$300M cash on hand. So net cash, SLI has a market cap of $700M while ORGN has a market cap of $300M. That's crazy town to me as ORGN clearly has a much more competent management team, is actually building the facilities right now, and has a much higher upside case potential.

the earnings call was mostly positive.

however management was not open/clear about the 2nd plant and how funding is going to be secured although they keep saying it is going to be through Louisiana bonds but nothing concrete yet. this is my biggest worry.

I got out at $4.80 on the 7th but on the 16th decided I want back in at $4.40

quote:

---

My goal is to accumulate about 25k shares under $6. At approximately 8k shares right now.

---

good to know

I am still in and riding it out. I think it's almost the opposite of SLI, where the stock kept mooning even though the fundamentals underneath didn't justify that market cap. ORGN, on the other hand, has the strongest business fundamentals to date, yet the market continues to hammer it and price it for failure. A very frustrating hold indeed but my investment thesis on it has not changed, in fact it's gotten stronger with time, so I'll HODL it.

It was down a fair amount last week due to the CFO leaving September 1, but Nate Whaley was the clear weak link in the management team and I am very confident they will find a replacement for him that is much better suited to manage ORGN as a revenue generating company in the future. If the market was rational, the stock should've been up, not down, with the news of Whaley's departure. But it goes back to the saying "can you remain solvent longer than the market can remain irrational"?

I wish ORGN was a privately held investment like SpaceX is for me as I really don't like the day to day noise of the stock market anymore. I think it's probably a 80/10/10 play. 80% chance it's a multi bagger from here (assuming tech scales anywhere close to their projected margins), 10% chance the tech kinda scales but not close to their projected margins, and 10% chance it's a zero as the tech doesn't scale for some reason. In my opinion, it should be trading at $10-15 right now and if it was privately held I think it would have a market cap north of two billion at the moment.

I have interacted with several of Origin's management team, including co-CEO John Bissell, in person. He's a very interesting fellow and decent chance he ends up being the Elon Musk of the materials/chemicals space. They are still kinda a startup so lots of startup type growing pains. They probably need a true COO and hopefully the new CFO will be light years more competent than Whaley.

On the bad side, I was not a fan of how they blamed the winter storm for the mechanical completion delay as clearly the delay was a month or so, not just a few days from the storm. They need to be better about padding in buffers to their timeline estimates. However, they are still light years more accurate to projections than almost any other deSPAC i've seen. Also, I find the lack of insider buying over the past year or so concerning, but the management team is not independently wealthy and they have tax liabilities from shares vesting so who knows what is really going on behind the scenes. Also, if management knew of deals (licensing deals for example) that will be announced in the future, it might be against the law for them to buy shares given that material information that is not public yet.

The Origin 2 plant is clearly going to be a 2026 build, not a 2025 build, but I expect at the mid year update in August that they'll announce it is dual train, and hopefully some type of partnership will be announced similar to the LanzaTech/Brookfield partnership.

Origin management needs to realize the key to massive returns here is to license the tech, not build a bunch of these plants which might not be their strong suit. The first earnout tranche is at $15/share in June '24, clock is ticking there for management to get those 8 million shares. I am hoping that the stock finally wakes up over the next few months if the O1 plant can scale, government grants could be announced, potential licensing deals, etc.

There many technical experts from companies like Exxon and Dow that left 20-40 year careers to go join Origin. Those people have stayed at Origin and haven't really left, which you think they would have if the tech doesn't work. Frank Mitsch of Fermium Research is the most respected chemical industry analyst, and he has a 12 month $20 price target on them. I'm hoping that my gut is right given the research I've done and that the market is just saying "show me" at the moment and pricing them for failure, time will tell. It could go to zero, so position size accordingly!

Thanks CC, i am going to keep holding

In isolation I would agree, but if it’s a dual train facility then it adds 300-400 million to the enterprise value according to my DCF model, even if it’s a year later, compared to a single train facility. I think market has already figured out O2 is not coming by 2025, I mean it’s not a secret, they haven’t even broken ground on the facility yet or cleared the standing timber on site. So hopefully dual train announcement, coupled with a partnership and government grants to help reduce debt needed can get the share price out of the cellar here.

They aren't even at FEL3 yet, which precedes FID. Post FID is usually when you see activity at the site. My guess is FEL3 early 2024, FID mid/late 2024, which would put them online late 26