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Blue Orca Capital said it is short renewable energy firm Enviva Partners (NYSE:EVA) as it believes the company is “flagrantly greenwashing its wood procurement.”
In addition, the activist investment firm stated that Enviva’s EBITDA is inflated, and it will cut its dividend.
Enviva shares plummeted over 19% on Wednesday.
In a research piece, Blue Orca dismissed Enviva’s claim to be a pure play ESG company, stating they think “this is nonsense on all counts.”
“In our opinion, Enviva is a dangerously levered serial capital raiser whose deteriorating cash conversion and unprofitability will drain it of cash next year,” wrote Blue Orca.
“Contrary to Enviva’s claims, it generates nowhere near the cash from operations to support its dividend, let alone future capital expenditures to drive growth. Rather, Enviva’s dividends are funded through capital raising. Given its already troubling leverage, we think Enviva will be forced into further dilutive equity raises, more borrowing at punitive rates, or most likely, a significant dividend cut,” they added.
Furthermore, the investment firm stated that Enviva is a “farce” and is “engaged in textbook greenwashing.”
“Hidden GPS data embedded in Enviva’s Track and Trace disclosures allowed us to geolocate the company’s harvests. Satellite imagery indicates that contrary to the company’s claims, in many instances Enviva is procuring wood from the widely condemned practice of clear-cutting. Former senior Enviva sustainability and procurement executives confirmed that this practice was endemic,” they declared.
