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Why Li-Cycle Stock Just Popped 11.5%

By Rich Smith – Sep 29, 2021 at 11:23AM

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Koch Investments Group is investing in battery recycling.

What happened

Shares of start-up lithium-ion battery recycler Li-Cycle (LICY -3.30%) stock had jumped 11.5% as of 10:30 a.m. EDT Wednesday after it was announced that the $1.9 billion battery stock will receive a $100 million investment from Koch Investments Group.

So what

Specifically, Li-Cycle announced this morning that Koch Investments subsidiary Koch Strategic Platforms will buy a $100 million convertible note from Li-Cycle "to support the Company's rapidly expanding growth opportunities in North America, Europe and Asia."  

Simple green arrow going up

Image source: Getty Images.

In addition to lending Li-Cycle the cash, another Koch subsidiary, Koch Engineered Solutions, will "potentially" work with Li-Cycle on "engineering, procurement, and construction services" to accelerate the rollout of Spoke & Hub Li-Cycle recycling plants able to absorb all the depleted output, and also the "battery manufacturing scrap" from new battery mega-factories that other companies are building.

Li-Cycle estimates that the total addressable market for battery recycling services in North America, Europe, and China has grown at least 50% over the past several months.

Now what

Koch's note will be convertible into Li-Cycle stock at $13.43 per share, creating the potential for the group to take an equity stake in the company if Li-Cycle stock gains even just 10% over where it already sits today -- potentially sparking even higher gains for the stock as investors notice Koch's commitment increasing. Alternatively, if Koch decides not to take a stake in the company, the note will come due on Sept. 29, 2026.

In the meantime, Li-Cycle will pay KSP variable interest rates ranging from 6% to 7% on the note.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Li-Cycle Holdings Corp. Stock Quote
Li-Cycle Holdings Corp.
$5.57 (-3.30%) $0.19

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