Short-selling firm expresses concerns about PureCycle

Hindenburg Research released a report analyzing investments in the polypropylene recycler.


Hindenburg Research, an investment research firm with a focus on short selling, has released a report highlighting some of its concerns about PureCycle Technologies LLC, a polypropylene (PP) recycling company headquartered in Orlando, Florida. PureCycle holds a global license to commercialize a patented solvent-based purification recycling technology for restoring end-of-life PP into virgin-like resin and plans to build a commercial-scale recycling plant in Ironton, Ohio.

Hindenburg’s report labels PureCycle as a zero-revenue, environmental, social and corporate governance- (ESG-) themed special purpose acquisition company (SPAC) that has gone public. It says, “The company’s insiders and SPAC sponsors do not seem inclined to wait and see how its claims will work out—they have positioned themselves to clear $90 million in cash tradable shares before the company generates any revenue.”

The report mentions past companies that PureCycle’s executives had taken public prior to their work at PureCycle. It also calls into question the reputation of Roth Capital and Craig Hallum Capital, investment banks that helped PureCycle to go public.

In addition, the report expresses skepticism of PureCycle’s technology and its proposed facility’s ability to secure needed PP feedstock.

PureCycle has partnered with Procter & Gamble on its technology. Procter & Gamble tells Recycling Today, "PureCycle has licensed our technology, and we look forward to them being a supplier that can help us and others meet recycling objectives in the future."

The report quotes a couple of industry veterans, including Scott Saunders, general manager of KW Plastics, Troy, Alabama, and Ajit Perera, vice president of postconsumer operations at Talco Plastics in California.

Saunders tells Recycling Today his quotes in Hindenburg’s report are accurate and weren’t taken out of context.

“There is so much buzz around chemical recycling processes that I think it has slowed down some advancement that could be made in packaging with proven technologies,” he tells Recycling Today. “I think that we have to welcome innovation, but we also have to take a look at it and point out if there are deficiencies and to not let those deficiencies stop and slow down potential successes from traditional mechanical processes. … We’re not afraid of PureCycle. They have not released any data or anything about raw materials in their ability to use that that makes me afraid of our position in the marketplace. But they could release something tomorrow that scares me to death.”

He adds that he thinks PureCycle’s biggest challenge will be securing feedstock.

“They’ve yet to identify in any public documents a readily available feedstock that comes close to the volumes that they’re going to do,” Saunders says.

Recycling Today reached out to Perera to verify his comments in Hindenburg’s report but did not hear back from him.

In response to Hindenburg’s report, PureCycle issued a news release that says Hindenburg “by its own admission, stands to profit from any decline in the company’s stock price, whether driven by its report or otherwise.”

The company continues, “We remain confident in our people, our technology and our long-term growth strategy. We believe today’s report from a short-selling firm is primarily designed to drive down the stock price in order to serve the short seller’s economic interests. We believe PureCycle is well-positioned to continue executing on its strategy to drive long-term growth and enhanced value for shareholders.”