Diving Deeper on Origin Materials?

Company Info:

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Micromidas, Inc., doing business as Origin Materials, produces and commercializes plant-based PET plastic. It develops a platform for turning the carbon found in biomass into useful materials, while capturing carbon in the process. The company serves tire filler, carbon black, agriculture, and activated carbon markets. Micromidas, Inc. has a strategic alliance with Palantir Technologies Inc. The company was incorporated in 2008 and is based in West Sacramento, California with a facility in Sarnia, Canada.

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From the other thread:

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The management team has a ~25M share earnout that would vest if ORGN trades above $15/share for a certain period of time before June '24 (and $20 by June '25 and $25 by June '26). Clock is ticking for them to more than triple the stock price to hit that earnout, hoping we start to get upward movement soon as the O1 plant goes online.

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Also:

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CEO John Bissell sold 150,000 shares of the firm’s stock in a transaction that occurred on Tuesday, December 27th. The stock was sold at an average price of $4.58, for a total transaction of $687,000.00. Following the sale, the chief executive officer now directly owns 1,215,828 shares in the company, valued at approximately $5,568,492.24. The transaction was disclosed in a document filed with the Securities & Exchange Commission

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Basically their business model is to replace the oil used to make many plastics with drop-in, carbon negative, chemically identical replacements produced from cellulosic feedstock (mostly wood waste products). In contrast to almost every other "green" product out there that has a substantial price premium compared to conventional products, Origin is supposed to be cost competitive with oil even at $40/barrel, so in fact they hope to produce these materials with a "green discount". More in depth company summaries can be found in the investor presentation links below: LINK

I view it as a binary play, either the tech works and it'll be a multi bagger (most likely from a buyout from a bigger player like BASF or BP), or the tech doesn't work and it'll be zero. My guess is 80/20 odds it works. We should know the answer on the tech scaling or not in the next 6-9 months based on product that will be produced from their O1 factory that is currently undergoing commissioning in Ontario.

Not a fan of most "green plays" or SPAC's, but I'm betting that Origin is a diamond in the rough. The fact they have poached a lot of top talent from Dow and Exxon is a bullish indicator.

Management has 75M total earnout shares that would vest if $15/share reached by June '24, $20/share by June '25, and $25/share by June '26, so they are heavily incentivized to avoid dilution before June '26. Between PAB bonds, tax incentives, and government cost shares (Inflation Reduction Act grants, etc), there's a pathway where hopefully they never have to issue more equity which is a great advantage in this brutal macro environment where many companies will have to dilute themselves into oblivion to survive and/or finance growth.

My guess is, assuming O1 proves scale, it should be at ~$10 by year end '23. I will start to take some shares off the table at $20, probably in '25 if I had to guess. Could be a $100 stock by 2030 if they don't get bought out, but my guess is they'll get bought out before then.

Where are you seeing that news?

ETA: nevermind I see it now.

Yeah I have done several hundred hours of research on this one. There is a discord group I’m in with other investors in it as well. I’d say their odds of success are about 80%, hopefully that’s conservative. If it works this company will be a major player in the materials space and have a market cap north of 10 billion in 5-6 years. If I am wrong on this stock I will stick to index funds going forward.

Here's an invite link to the discord, let me know if it doesn't work for some reason.

LINK

This a generalgrant stock baw

Buy gemsf instead

If you look at the S-4 form for that sale, it was a preplanned tax sale. Management here is not independently wealthy so they are selling off the portion of granted shares that vest that is necessary to pay off tax liabilities that are generated. Most of them don't have the capital on their own to pay those taxes. So on net the management shares are increasing (as net share vested is still going up even after pre planned tax sales) so they have more skin in the game.

I'd say the HSBC analysts, but my favorite analyst is Frank Mitsch from Fermium Research who I think understands the ORGN story the best and has a $20 price target.

Fermium Research report link

HSBC report link

I believe that they had consultants put together their financial projections from the original SPAC deck and they articulated (at the time back in early '21) that those projections were supposed to be fairly conservative. Since then, the potential for income streams from carbon black and FDCA has grown quite a bit, and those were not included in the projections. I'm hoping those will offset any underestimation of costs that could be in their projections. NexantECA did a viability report and generally signed off on the tech and assumptions but thought that costs could be slightly higher than ORGN assumed.

Given the binary nature of this tech working or not, I think assuming the tech works that dual train facilities will be the model for O3 and beyond (maybe even O2), and there should be considerable cost savings there as well compared to single train facilities.

I have a detailed DCF of Origin that I've made and I think in today's dollars that ~$17/share (or $58 by 2030) is fair value if they use single train facilities and ~$27/share (or $120 by 2030) is fair value if dual train. These assumptions also include earnout shares that would vest at various price targets, annual company LTIP/board member share grants, 20% cost of capital, 3% terminal growth, no cost share/tax incentives, and no licensing deals.

If they are as close on their projected economics as they were on the O1 finish date, then this should be a home run. They claimed to be cost competitive at $30 oil, if it ends up being $40-50 I think that's more than OK and they'll still be in a spot to provide a carbon negative green discount which will be unheard of in these markets and could generate demand for dozens of these plants.

What are some of your other speculative plays besides Origin?

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