Origin Materials - Week in Review #5 (August 1-5)


It was quite an eventful week for Origin Materials, with the company releasing Second Quarter 2022 Earnings results and hosting the subsequent conference call. There is a lot of information to process, so the following is certainly not going to be exhaustive or complete by any means. 

Construction Update

Construction timelines for Origin 1 in Sarnia, Ontario remain on time and things are on track for completion by the end of 2022. As of now, start up is set to begin at the beginning of 2023. Specifically, the piping modules have been delivered and installed, as well as the storage tanks which will ultimately hold product. Both the biomass building and HTC buildings are starting to take shape. The biomass building will be where feedstock is stored, while the HTC building will be where carbon black is derived from HTC. The filter press used in HTC processing has been delivered to Sarnia and is 100 times the size of the one at the pilot plant in Sacramento.

To view the construction update video, click here.

There are two new faces to the construction update videos: EH&S Manager Toks Balogun and Process Engineer Sydney Gordon.

Mr. Balogun joined Origin Materials in April 2022. He boasts "28 years of experience in leading, developing, and integrating quality, health, safety & environmental management systems." Mr. Balogun previous companies include HCL Technologies, Qatar Petroleum, and Shell. His role with Origin Materials as EH&S Manager is to provide leadership and ensure that EHS programs are in place to maintain license to operate from construction to the manufacturing phase of the facility.

Ms. Gordon joined Origin Materials in April 2021. She is an "ambitious, dedicated, and positive Chemical and Biomolecular Engineer...graduated from Georgia Tech in December 2018." She previously worked for ExxonMobil, where she spent two years as a process engineer.

Extending Relationship with Danone

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Previously, there were construction and delivery milestones that needed to be met, or Origin would've been required to pay damages to Danone for failure to meet those requirements. The amended Offtake Agreement removes these, so there seems to be a substantial amount risk off the table now for both parties. 

Customer Demand Remains Strong and Continues to Grow

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It may seem that customer demand is beginning to slow, due to the increase from quarter to quarter not being as large as some previously reported. But if you look at the new offtakes/capacity reservations reported in Q3 2021, the new agreements for Q2 2022 are comparable. The important thing is that the demand is still growing. A new "mystery" customer has been listed here too, a "major U.S. supermarket chain."

Speculation has run rampant on these unnamed customers.

Guesses on the "major global retail company" include:

  • Ikea
  • Walmart
  • Amazon

The "major global toy company" could be:

  • LEGO
  • Mattel
  • Hasbro

As far as the supermarket chain, take your pick! It could be any of them, including Kroger, Whole Foods, or Albertson's. When asked about said partnership, Co-CEO Rich Riley commented: "They do typically start with the private label business, which is – where the companies can have the most direct impact and then look to expand from there. So we're excited to have our first major grocery partnership."

Galowitz Sells

Chief Commercial Officer Stephen Galowitz became the first insider to sell shares, a full month after the lockup period expired at the end of June. The sales were part of pre-arranged trading plan so it appears to be a case of C-suite member getting paid more than anything. 

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Mr. Galowitz has been with the company since May 2014. Information regarding his compensation has been outlined in previous S-1 filings, and it really just re-emphasizes the fact that this is just a case of a company insider getting paid, rather than selling shares due to pending bad news or unfavorable outcomes for the company. Mr. Galowitz still has control over a total of 554,422 shares of the company, with 163,265 shares held directly and 391,157 controlled indirectly.

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Craig-Hallum & Fermium Remain Bullish

In a research note published August 4, Craig-Hallum analyst Eric Stine reiterates his "buy" rating on Origin Materials and lists a $16 base case price target. Stine states that the number "is appropriate given the secular growth of sustainable plastics and materials, substantial revenue and profitability growth, Origin's first mover advantage and proprietary technology, blue-chip customers, partners, and comparable valuations." An $82 bull case price target is given, based on a 12,100 M lbs. production capacity & best pricing scenario by 2028.

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Similarly, Fermium analysts Frank Mitsch & Aziza Gazieva have reiterated their "buy" rating with a price target of $20. 

Employee Headcount

My unofficially tally puts the current number of employees working for Origin Materials at 136. This is up 23% from Q1 earnings in May, when the headcount was 110. The management team for Origin 1 is in place, per CFO Nate Whaley. The company currently has 22 active job listings posted to LinkedIn, which includes 6 operations positions in Sarnia (Origin 1).

Institutional Position Changes

As you can see, there were more than a few institutional position updates this week:

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If you can squint your eyes just enough, you may actually be able to read the numbers. There were a few sellouts, some dramatically reduced their stakes, and there were a few large positions opened. With macroeconomic concerns on global inflation and slowing growth, it's no wonder that institutions may be selling out. To me, it doesn't seem much to do with the company so much as concerns about the global economy. 

A notable add was by Candriam Luxembourg with a large 551k share position. "Candriam has been a pioneer in Sustainable and Responsible Investments (SRI) since 1996. The company states that investment opportunities and risks can’t be fully evaluated using traditional financial measures alone and that Environmental, Social and Governance (ESG) criteria should be taken into consideration." They currently have about €150 billion assets under management.

Investor Q&A

As with previous earnings calls, Origin invited investors to submit questions ahead of the call. Here are two of the most intriguing:

Has Origin been in contact with anybody attempting to use its carbon-negative, carbon black as a component in the anodes of batteries, especially the next-gen battery companies or legacy as well as the EV specific automakers?

Yes, we are exploring the application of our HTC and our carbon black for those applications.

Can you speak specifically to what lobbying or educational efforts Origin is engaged in to get present regulators to differentiate between recyclable bio-based carbon, negative plastics and legacy plastics and materials?

We do closely track these legislative developments, and we do engage with the relevant legislators and policy makers to help tell our story and make sure they understand the incredible impact that we can have and how we're aligned with the spirit of these legislations.

Weekly Chart

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It seems that the earnings event was not only a catalyst to drive the stock price higher, but also brought more volume to trading. The price close just below the 50-day moving average on Friday & remains above the 200-day moving average. 

Louisiana Public Facilities Authority Meeting

In a document dated August 4, 2022, a preliminary agenda lists the "Origin Materials, Inc. project" to get authorization for issuance of revenue bonds. 

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This is crucial for funding of the Origin 2 facility in Geismar, Louisiana. From the O2 announcement presser: "The pending state and local incentives are estimated to be worth more than $100 million. In addition, a Private Activity Bond volume cap allocation from the State of Louisiana, pending finalization, is expected in the amount of at least $400 million. Private Activity Bonds are tax-exempt bonds authorized by state and local governments for the financing of qualified projects with private capital."

The meeting of the Board of Trustees of the Louisiana Public Facilities Authority to approve the application for Origin is scheduled for August 9, 2022 at 11:00am on the 6th Floor, Suite 650, 2237 South Acadian Thruway, Baton Rouge, Louisiana 70808.


And that is your "week in review" for Origin Materials. Good night!

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