Battery recycler Li-Cycle (LICY) is going public through a SPAC merger with Peridot Acquisition (PDAC). PDAC stock has dropped significantly from its 52-week high and the transaction is expected to close soon. What's Li-Cycle’s stock forecast and will it go up after the merger?
After the merger deal is complete, PDAC public shareholders and founders will own 23 percent of Li-Cycle, while PIPE (private investment in public equity) investors will own 19 percent.
The Li-Cycle and PDAC merger date
Voting on the proposed merger deal is scheduled to take place on Aug. 5 at 10:00 a.m. ET. The transaction is expected to close immediately after it gets approved by PDAC shareholders. Li-Cycle’s common stock will start trading on the NYSE under the ticker symbol “LICY.”
Li-Cycle’s stock forecast
Currently, Li-Cycle stock isn't covered by analysts. However, given that it's the largest lithium-ion battery resource recycling company, analysts should start covering it soon.
Based on PDAC’s current price, Li-Cycle has an enterprise value of $1.0 billion. Based on this value and Li-Cycle’s projected total revenue, its valuation multiples for 2021 and 2022 are 83.3x and 13.3x, respectively. The company’s 2025 EV-to-sales multiple of 1.0x looks much more attractive.
Will Li-Cycle stock go up after the merger?
The outlook for Li-Cycle stock looks promising. The company recycles used lithium-ion batteries to power products like electric vehicles, smartphones, and medical equipment for reuse in battery production and other related applications. In 2025, around 1.2 million tons of batteries are projected to reach the end of their life cycle, followed by 3.5 million tons in 2030, according to a market research report from IHS Markit.
Li-Cycle stock is a good investment.
The 39 percent pullback in PDAC stock has provided buying opportunities for long-term bargain investors. Li-Cycle expects to generate sales of $12 million in 2021 and forecasts its sales growing by 551 percent in 2022. Between 2021 and 2025, the company expects its revenues to grow at a CAGR of 82 percent to reach $958 million. It expects to turn EBITDA positive in 2022 and projects an EBITDA of $541 million in 2025. Also, Li-Cycle expects to report an attractive EBITDA margin of 56 percent in 2025.
As part of its merger with PDAC, Li-Cycle will receive around $615 million in gross cash proceeds to pursue its growth plans. The amount includes about $300 million in cash held by PDAC in trust and an additional $315 million in PIPE at $10 per share. The PIPE investors include Neuberger Berman Funds, Franklin Templeton, and Mubadala Capital.
What happens to PDAC after the merger?
PDAC stock will immediately convert to Li-Cycle stock after the merger is completed and cease to exist in its SPAC avatar. Therefore, PDAC investors will become shareholders in Li-Cycle.
What happens to PDAC warrants after the merger?
PDAC warrant holders can exercise their warrants either 30 days after the merger closes or 12 months from the IPO, whichever is later. The exercise price of the PDAC warrant, like for other SPAC warrants, is $11.50.