Shares of Danimer Scientific (DNMR -8.52%) dropped a quick 17% as trading got underway on March 30. The news likely driving the decline was the company's after-the-market earnings release on March 29, the first quarterly report of its public life.
Danimer Scientific, which is involved in making biodegradable plastics, came public through a blank check company in the last few trading days of 2020. That means its fourth-quarter 2020 earnings report was its first as a public entity, though for most of the period it wasn't actually public. Basically, this report is setting something of a benchmark for future periods. Investors don't seem to be too pleased with the results.
Danimer Scientific had revenues of around $12 million, up from $8.7 million in the same period of 2019. While that's not too bad, it lost $11.2 million in the fourth quarter of 2020, up from a loss of $3.3 million a year earlier. To be fair, the transition from private to public isn't a simple one, and the quarter included some one-time costs associated with the decision. However, management made a point of noting that it is seeing strong demand for its products and augmented its plans to build a new facility that won't even break ground until 2022 (and won't be operational until mid-2023). So it's highly likely that the red ink will continue here, given the modest top-line numbers and capital spending needs. Coming public has left the company flush with cash ($377 million at the end of 2020), and it clearly has plans for the money, but the new facility won't bear fruit for another couple of years. That's a long time to wait on Wall Street.
Danimer Scientific is an interesting company, for sure, but it's kind of hard to understand how it has a $2.8 billion market cap given the size of its actual business and the fact that there's no particular indication that profits are near at hand. Though to be fair, management is projecting a "significant ramp up" in revenue in 2021.
Still, now that the company has reported earnings for the first time, perhaps investors are starting to wonder if the multibillion-dollar valuation being afforded to Danimer Scientific really makes sense. Including today, the stock has already lost around half of its value since hitting a price peak in early February. It seems as though the special purpose acquisition vehicle (SPAC) pixie dust may be starting to wear off. Conservative long-term investors will probably want to stay on the sidelines until the company has a longer track record as a public entity, and perhaps even until that new facility is operational in 2023.