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The company is short Li-Cycle as the battery recycling SPAC business is a near fatal combination of stock promotion, laughable governance, a broken business hemorrhaging cash, and highly questionable Enron-like accounting.
Among other things, the short seller said LICY has adopted an accounting approach that is vulnerable to abuse, which also allows the management to mark up the value of its receivables on unsold products and runs the gains through its revenue line.
As a result, Blue Orca estimates that around 45% of the company’s sales are simply receivables on products that had not been sold and not actual revenues. This is why, according to the short seller, why LICY’s CFO and auditor quit earlier this year.
Furthermore, the report goes on to say that Li-Cycle is a governance nightmare.
“Its founder is a serial penny stock promoter recently sanctioned by Canadian authorities and its management team diverted half a million in shareholder money to enrich their entourage with wasteful spending, including tens of thousands of dollars on leather goods purchased from the CEO’s family.”
Li-Cycle went public through SPAC with Peridot Acquisition Corp last year.
Li-Cycle stock is down over 20% YTD.
By Senad Karaahmetovic