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On the December 16, 2021 episode of "Mad Money," Jim Cramer said of the continued SPAC craze: “The SPAC deals keep coming because they’re a great way for institutional money managers to get a guaranteed return, but everybody else in the process gets the short end of the stick." He continued, “When you zoom out, it’s remarkable how badly some of these post-deal SPAC stocks have done."
Since going via a SPAC deal with Artius Acquisition that closed on June 25, Origin Materials (NASDAQ: ORGN) has plunged 41% -- closing on December 17, 2021 at $5.99 a share. So it was a bit strange that Cramer decided to discuss a "de-SPAC" company a day after thrashing SPAC deals. Regardless, the Mad Money host took a bullish stance on the chemical company, saying "If they can really pull it all off, the value of this business could be enormous. Of course, we don’t know if they can pull it off."
If you aren't familiar with Origin Materials, they have developed a proprietary tech platform that converts low-cost biomass feedstock such as wood chips, pulp waste, and cardboard into two intermediates: CMF and HTC. The CMF can then be converted to PET. Traditionally made from petroleum, Origin's technology effectively eliminates oil and its derivatives from the equation. Their products are carbon-negative and lower cost than petroleum-based counterparts.
So, what exactly are the risks going forward? To name one, the company has never scaled its platform to industrial production. They have successfully produced samples from their pilot plant in West Sacramento for their customers. Pepsi, Nestle, and Danone are among their customers. Origin has also partnered with Palantir, Ford, Primaloft, and Solvay to develop and expand their offerings. Once built, their "O1" production facility in Sarnia, Canada is expected to produce 1 million tons per year. The scaling risk is just a matter of execution.
So, with an average viewership of 193,000 per episode, it's go to see Origin Materials finally get some well-deserved attention. The stock price has yet to follow, but analysts are mostly bullish too:
- Sriharsha Pappu of HSBC says BUY with a price target of $15
- Eric Stine of Craig Hallum says BUY with a price target of $22
- Frank Mitsch of Fermium says BUY with a price target of $30
- Robert Koort of Goldman Sachs is NEUTRAL with a price target of $10
What may appear to some as a SPAC deal "gone wrong," perhaps Origin Materials is a true diamond in the rough. With a $1 trillion total addressable market, the runway is quite long and ORGN could be a multi-bagger in the making so long as the company continues to execute. Expect the road ahead to be rocky, as it is a growth stock. But for those who have patience and can stomach the volatility and risk, Origin Materials may well to prove to be a leader in the emerging field of "green tech."
Cramer may be right about retail investors getting "the short end of the stick" when it comes to SPAC deals. But at this point, and at the current price, it seems that the downside on Origin Materials is not only minimal but well worth the risk when compared to the potential returns.
This blog post represents my opinion and is financial advice. I am not a financial advisor, just a rocket enthusiast. Always perform your own due diligence and any trades/investments you do is at your own risk. I hold shares of ORGN.
