Activist investment firm Blue Orca Capital recently published a report on Li-Cycle Holdings Corp. (LICY) (“Li-Cycle” or the “Company”) indicating that its financial standing isn’t as stable as the company’s press releases indicate.
Blue Orca’s report describes the company as one that uses predictions as reported revenues, and that “Li-Cycle recognizes revenues using an Enron-like mark-to-model accounting gimmick.”
The report goes on to say, “In our opinion, Li-Cycle is a fatal combination of SPAC trash, stock promotion, awful corporate governance, faulty accounting, and a broken business model which is not economically viable.”
This news sent Li-Cycle’s stock price down considerably on March 24, 2022, during intraday trading.
Li-Cycle’s business revolves around the recovery and recycling of the materials used in lithium-ion batteries, or “li-ion” batteries. These batteries are primarily used in a wide range of electronics, such as wireless headphones, appliances of all sizes, cordless power tools, toys, electric vehicles, and energy storage systems. Li-ion batteries are smaller and lighter than conventional batteries, and can hold the same amount of energy as many larger batteries. The technology has led to the development of smaller cordless consumer products.
Li-ion batteries shouldn’t be tossed out in regular household or business trash because of the fire risks. Li-Cycle works to eliminate these hazards and recycling the raw materials needed to continually replenish the supply of these highly sought-after battery products. For every battery that’s discarded and not recycled, the opportunity to replenish the supply is lost, according to the EPA.
But Li-Cycle’s revenues aren’t based on the “recycled black mass” that they’ve sold, but the anticipated future sales that haven’t yet occurred. This means that their revenues are based on the product’s value in the future. Are they correct? It’s impossible to know, since the company sets its own revenues based on planned and future sales, not on what they’ve actually sold in the past. The report continued, “We suspect that under this framework, Li-Cycle marks up the value of its receivables on unsold products and runs the gains through its revenue line.”
Are You An Investor In Li-Cycle Holdings?
If you’re an investor in Li-Cycle Holdings, you’re encouraged to contact Silver Law Group for additional information and to help us in our investigation.
Silver Law Group is a nationally recognized class action law firm representing victims of investment fraud. Our attorneys represent investors in class action lawsuits against issuers in state or federal court and investors in securities arbitration claims against Wall Street firms for stockbroker misconduct.
Scott Silver, Silver Law Group’s managing partner, is the chairman of the Securities and Financial Fraud Group of the American Association of Justice. Contact us for a consultation at email@example.com or toll free at (800) 975-4345.