What happened
Shares of PureCycle Technologies (PCT 1.81%), which is working to build out a plastics recycling business, rose as much as 14% in morning trading on March 9. By roughly 11:30 a.m. ET the stock had pulled back and was clinging to about a 5% gain. The driver here was, sort of, its fourth-quarter 2021 earnings update.
So what
PureCycle's news release covering its fourth-quarter 2021 performance didn't actually include any financial statements. These statements, which investors generally consider pretty important, will eventually show in a Securities and Exchange Commission (SEC) filing. Essentially, PureCycle, which is basically still trying to build out its recycling business, is probably bleeding cash and is likely to continue doing so until it can get its first recycling plant up and running. Which is why most of the quarterly update was spent on more positive things, like the progress the company is making on capital investments. To sum it up quickly, the company says it is still on track to open its first facility by the end of 2022 and expects to break ground on a second facility in late March.
Image source: Getty Images.
Then there was the other bit of information provided about a $250 million sale of stock in a private placement. That infusion provides PureCycle the cash it needs to continue spending on the buildout of its facilities. This is important, because the company isn't profitable. Without continued support from investors it could be difficult to get the business up and running. Wall Street likely saw the financing as a positive, which it is, and bid the shares up.
Now what
PureCycle is not a great option for conservative investors. And the pullback from the early excitement isn't surprising, given the still speculative nature of the business. Basically, the company doesn't really have a business yet because it is still building its processing facilities. Although the recycling nature of its technology is interesting, particularly for those with an ESG focus, most will probably be better off watching from the sidelines until at least the first facility is operational, hopefully in late 2022.
