What happened
Shares of Origin Materials (ORGN 1.73%) dropped like a rock Thursday morning, trading 67% lower as of 11 a.m. ET. Yes, you read that right: More than half of the chemical company's market capitalization was wiped out with the market's opening today.
Origin Materials, which calls itself the "world's leading carbon negative materials company" and boasts some big names among its customers, just pushed back the construction of a plant. That's not good news coming from a young company that has just started generating revenue.
So what
Origin Materials released its numbers for the second quarter on Aug. 9. It generated $6.9 million in revenue versus no revenue in the year-ago period and ended the quarter with $218 million in liquidity.
More than its numbers, though, Origin Materials' latest updates haven't gone down well with the markets.
In June, Origin Materials started its Origin 1 plant -- the world's first chloromethyl furfural (CMF) plant -- in line with its guidance. CMF can be used to produce a wide variety of chemicals and materials like plastics with a negative carbon footprint.
The company, however, has pushed back the phase 1 start-up timeline of its second commercial plant, Origin 2, to late 2026 to 2027. Until last year, Origin Materials expected the plant to be operational by mid-2025. Management blamed several challenges for the delay in construction, including higher labor and raw material costs, inflation, and higher interest rates. Origin 2 will produce materials that can be used to make polyethylene terephthalate, or PET plastic as it's commonly known.
That's not all. Origin Materials also upped the total budget for Origin 2 to $1.6 billion, from its initial budget of $1.07 billion provided in February 2021, and is exploring options to raise funds for the plant.
Now what
Origin Materials' technology is intriguing: It can convert sustainable feedstocks such as wood residues, wood waste, and agricultural waste into useful products and materials that are currently made from fossil feedstocks like petroleum and natural gas. For example, the company recently created all-PET bottle caps that can be used in industries like beverage packaging. Big names like Danone, Nestle, and PepsiCo are not only customers of Origin Materials, but also investors in the company.
Opportunities abound, and Origin Materials expects to generate $40 million to $60 million in revenue this year. However, investors aren't sure how the early-stage company will commercialize its technology if it cannot set up factories on time and within budget.
