The last I wrote on Origin Materials was calling the stock undervalued, but not by much. At that time, it appeared to me that the stock was worth about 65 cents a share; derived from a market capitalization equivalent to the "cash floor" of $95 million which is the cash on hand level they aim to maintain throughout 2025.
Now, three months later and with another earnings call in the books, the company has recovered its stock price and is set to regain NASDAQ compliance by meeting continued listing requirements. In January, they had received a notice that the company had 180 days to get its share price back over $1. Trading below that one dollar level for 30 consecutive business days is what triggered the warning letter.
It's been a roller coaster ride for investors in Origin Materials, especially those who had bought shares of the SPAC vehicle which took the company public via reverse merger in June 2021. The stock plummeted from $10 before settling in the $5-7 range. The plans to delay and re-design the Origin 2 facility last August caused the stock to sink even further down to a buck and change, before finally reaching an all-time low of 44 cents at the end of March 2024.
The company's stock hit that all-time low price two months after receiving the de-listing warning letter from NASDAQ. The company had to have a backstop plan in place, in case they couldn't recover the share price organically. So, at the annual stockholders meeting in May, an authorization for a reverse stock split was voted for. Fortunately, this recent ten day streak of closing above $1 puts the stock back into NASDAQ compliance.
It won't be official until they're removed from the dreaded noncompliant companies list but that should happen tomorrow.
So what? While it is nice to not be facing down the possibility of a reverse stock split or the general threat of being delisted, the stock is still well off its mark on the way to recovery. While it has more than doubled from the all-time low, it's still a long road ahead to get back to the "pre-pivot" level. The next major hurdle on the chart appears to be $1.28 -- a break of that could send it back to $1.50 -- it will take a climb back to $1.80 then perhaps that big nasty gap on the chart from August 9, 2023 may start to fill.
That is quite the gap though! Some positive updates on the caps and closures business would do wonders to help propel the stock back up too. The way I see it, investors in Origin Materials got to have some serious guts...and patience. That intestinal fortitude should pay off, assuming the company sticks to its roadmap and can successfully overdeliver. Look for developments on first cap lines toward the end of 2024. However, hopefully they won't wait that long to provide a meaningful update.
So, how much does the stock appear to be worth now? Well, decisively more than 65 cents. It really is hard to put a price tag on a company whose technology has yet to be fully monetized. Assuming we are being sandbagged on how much revenue the caps business can generate (management has stated they intend to underpromise and overdeliver), a 2x value of the "cash floor" mentioned earlier would value the company at about $1.30 per share. Any update regarding a partner financing/build of Origin 2 could increase the value even more. At this point in time, it's still a game of "wait and see."
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