I have to admit, Li-Cycle (NYSE:LICY) is one company I’ve had on my radar for some time. Accordingly, today’s decline of more than 40% in LICY stock at the time of writing caught me by surprise.
Li-Cycle’s business model is focused on the recycling of lithium-ion batteries. One of the major knocks against electric vehicles (EVs), at least from an environmental standpoint, is the damage caused by improperly discarded and under-recycled batteries. It’s my view that more companies like Li-Cycle are needed to address this problem.
However, in order for Li-Cycle to truly become a major player in this sector and turn a profit, scale is the missing factor investors want to see. Thus, there is significant interest in the company’s Rochester plant.
Accordingly, today’s announcement from Li-Cycle that it will be pausing the construction of this factory as it initiates a review of this project has clearly taken the market by surprise.
LICY Stock Plunges on News of Construction Pause on Key Hub
It’s worth noting that Li-Cycle is simply pausing construction. It may continue “pending completion of a comprehensive review of the go-forward strategy for the project.” So, this isn’t a done deal yet. Perhaps that’s one of the reasons why LICY stock is rebounding this afternoon.
That said, it’s also worth noting that some experts have noted that this pause could impact the company’s “pending agreement with the Department of Energy for a $375 million loan to complete the facility.” Thus, it’s possible that the entirety of the growth trajectory some investors had baked in will need to be adjusted, or scrapped.
I hope construction resumes and Li-Cycle does what it needs to in order to grow to scale and becoming a key player in this space. Battery recycling is one of the key components of the electrification life cycle I don’t think gets enough attention. Indeed, it would be a sad day to see the market completely give up hope on a company like this. But that’s capitalism.
We’ll have to wait and see how things play out. While I’m hopeful, I’m also aware that’s not an investing strategy. The market is speaking its thoughts loudly today. This is a stock that’s back on the top of my watchlist now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
