Why PureCycle Technologies is up nearly 40% today

Actions of PureCycle Technologies (PCT 37.74%) was up 37.9% as of 1:00 PM ET Wednesday.

The company, which is trying to commercialize its polypropylene recycling technology, received an infusion of cash from investors today. While the cash raise will dilute investors somewhat, the funding appears to have allayed investor fears as the company moves closer to commercializing its recycling technology.

A proof of trust

Today, PureCycle issued a press release disclosing a $90 million raise from existing private equity partners Sylebra Capital Management and Samlyn Capital, LLC. The $90 million consists of $50 million in preferred stock and $40 million raised in a capital increase at $4.69, which was the stock’s closing price yesterday. In addition, PureCycle issued 5 million warrants to its partners, which are convertible into shares at $11.50 per share, with an expiration date of December 1, 2030.

Apparently, investors were excited about the cash infusion, as the company only had about $11 million in cash at the end of last quarter. Additionally, investors may have been encouraged by announcements of progress at the company’s Ironton, Ohio plant.

Management says Ironton processed 10,000 pounds in an hour and experienced two days where it processed 200,000 pounds per day in September. Management also announced plans to process £1m in September and then £3m per month in the fourth quarter. This will also be the time when the company should start generating significant revenue.

Dan Gibson, Chief Information Officer (CIO) of Sylebra Capital Management, said:

Bringing cutting-edge technology to market is never easy, but the tangible manufacturing progress we’re seeing in Ironton is undeniable. Driven by an increasing consumer focus on corporate sustainability goals, we believe the underlying demand for recycled material is huge and unmet. We are excited to continue partnering with PureCycle to bring its high-quality materials to this underserved market.

An exciting time for PureCycle, but with risks

The prospect of any company commercializing a new technology is exciting and brings with it the potential for multibagger returns. However, it is also very risky. Investors don’t really know what short-term revenues and margins will look like, or what setbacks there may be in the initial production ramp.

Still, for high risk, high upside investors, PureCycle is definitely worth a look. The end markets for polypropylene are huge and recycled products are increasingly in demand as companies look to boost their environmental, social and governance (ESG) scores.