Yet Another Value Podcast - Louis Camhi presents an ORIGINal investment thesis $ORGN

Episode Date: August 20, 2021

Louis Camhi, a private investor, discusses his thesis for Origin Materials (ORGN). Origin is a recent deSPAC that has seen a brutal sell off, but Louis thinks the company represents a hyper skewed risk reward, albeit one with a VC style downside (i.e. if it doesn't work out, they'll be worth basically nothing). Louis breaks down what Origin does, why he's so confident that they can build their plans on time and on budget, the demand he sees for their products, and a bunch of other pieces of the Origin thesis. Louis's twitter handle: https://twitter.com/valwithcatalystChapters0:00 Intro1:25 Origin overview4:05 How Origin's product is carbon negative6:10 Discussing Origin's SPAC sponsor credentials9:10 Why were these the right sponsors to take Origin public?11:25 Timeline for Origin to get to revenue and scale up14:45 Origin 1 and 2 cost and backlog strength18:40 Could Origin's backlog be impacted by construction delays?20:30 How unique is Origin's process and technology25:40 Discussing Origin's cost and if this can work without getting an "ESG" premium price27:50 Construction cost risk32:25 Various upside and downside risks35:00 Origin's financing plans39:40 Origin's long term margin outlook41:25 Why didn't the SPAC sponsors put equity into the deal?46:25 Comping Origin to other peak SPACmania buzzy deals55:00 What other deSPACs are catching Louis's eye58:20 Quick Katapult and Ironsource mention1:00:35 A little longer ALIT mention

all right hello and welcome to the yet another value podcast i'm your host andrew walker and with me today i'm excited to have louis cammy louis is ex citadel and he's actually prepping to launch his own fund once you know he's gotten a little bit of time off and everything so congrats on that i'm excited for you and i'm excited to have you on the podcast louis how's it going thank you it's going well thanks for having me great well hey let me start this podcast the way to do every podcast first just a quick disclaimer for everyone nothing on this podcast is investing in We're going to be talking about a smaller cap, de-spacked company that, you know, some people might argue as a science project.

So everyone just remember, especially this company, you know, the risk level is much higher than your typical company. Nothing on here is investing advice. So let's get that out the way. Second thing, I want to give a pitch for you, my guess, you know, anyone who's read my blog knows that I have been very skeptical of SPACs in general, but there can be diamonds in the rough. And one of the reasons I've been skeptical is I don't find a lot of people doing great work on

them. Most of the work comes down to, oh, well, when they despaq, they put out projections. And if you run the projections on next year's numbers, it looks kind of cheap. And everybody's getting their face ripped off. But you know, I've been chatting. And I know you've done a lot of work on a lot of these despaques. And you've got some interesting angles. And you can back up a lot of the positions you have, which I don't think a lot of people can do that. So I'm excited to have you on. I'm excited to talk about one of the companies you've done a lot of work on. And let's just go from there. You know, the company we're going to talk about is origin materials. This ticker is ORGN. Lewis, why are you so excited about Origin? Sure. Well, to start off, I share your skepticism of SPAC. So you should know that I'm not looking at this as, oh, it's a SPAC, we got to own it. I'm happy to talk stats about SPACs. I'm going to focus my fund on SPACs. But for Origin specifically, you know, I found in my career the most profitable trades

are where you could ride a big trend. And to me, there's no bigger trend than ESG and the new focus on carbon neutrality. And so what Origin does is they manufacture PET that is carbon negative. And what is PET used for? You know, the most common use case that we think of is, you know, plastic for bottles and whatnot. So think about that bottle at Pepsi being carbon negative in packaging. And there's many more use cases going through clothing and tires and building products. So to me, the critical dynamic is we know this trend on carbon neutrality and in this case a carbon negative input.

and they're manufacturing it for the same price. So in the past, if you're a company, you have to choose. Do I make money or do I go green? And now they don't have to choose anymore. And so to me, that's a no-brainer. And the PET is chemically identical to petroleum-based PET. So if you're, you know, I'll focus on Pepsi and just use them as an example. If you drop that into your existing equipment, you know, you get your bottles.

No changing required, no retooling. Pepsi's obviously tested this. They're investors in the company. And to me, that's really interesting. And so, you know, obviously we have SPAC projections. I know, you know, SPAC projections on the whole have been discredited lately. But to me, you know, they're on the right side of the trend. And if they can execute, there's going to be a lot of upside in the stock.

And we could talk about the numbers and what this looks like. But, you know, it's you're riding a trend. You're early. You know, something I've been saying about this before is this is really like a venture capital investment. As you said, this is a riskier than normal stock. You know, if you're wrong, the stock could really be a zero. And if you're right, the stock could be worth it from $5 and change up 5x, 10x, 20x, depending on some of the projections.

And, you know, that to me is a diligence and portfolio sizing question. But we have a lot of people saying like, oh, I wish I could have been in the Series C of Facebook. And there was obviously no mechanism for an individual investor to be in. Now, in fairness, for every Series C success story, there's probably a bunch of failures that we don't hear of and we're glad we didn't invest in. So this is the opportunity to get in early, do your work, and know that if it works, you're going to make a lot of money. And if it doesn't, you're going to lose a lot of money. And you just have to be comfortable with that risk reward.

And obviously, I am, and that's why I'm talking about this today. Perfect. Perfect. So I guess the first, and you covered it well. So origin, I think in the long run, they could do a lot of things. But the main thing they're focusing on right now is they take, I believe it's pulpwood, wood pulp. It's a wood-based product. They take it, but they can actually take other stuff. And they've got a process where they take that.

that they're going to convert that into a basic building blocks that could, you know, it could make, I think a plastic water bottle. They mentioned a lot of, they said, hey, the actual growing uses for this thing is seat covers, textiles, that sort of stuff. You can take that and you can say, hey, instead of making this out of something petroleum base, make it out of something wood based. And this is not only is it better for the environment because it's not patrolling based, but actually, if you take wood, I believe the thing they said is wood absorb CO2, normally when you use wood that releases the CO2. So this is actually carbon negative because. you're taking the wood, turning it into a plastic feedstock, and then using that for

something. So that CO2 never gets released. So it's carbon negative. Am I kind of thinking about that correctly? That's exactly right. And I am not a scientist or a chemist, but that is exactly my understanding too. And the companies actually publish a report from Deloitte on their website that kind of affirms all the carbon negative dynamics of their product. So, you know, for one thing, you know, SPACs tend to be very cagey and not forthcoming on disclosure. And I found origin to be a little more forthcoming and not to go off topic, but in my last call with them, I said, you know, one of the big feedback, pieces of feedback that I read on Twitter is like, we want to see the product, we want to see the existing facility in Sacramento. How about a video? And I said,

yeah, we're going to do that. We like that idea. And we're also going to have some, you know, there's two big consulting reports that if you're an institutional investor and sign an NDA, you can read, which, you know, I think is pretty helpful. They're working to come up with kind of a version of that that's not super sensitive that they can publish. Because their view is, you know, we want to share the story, we want to get it out, we have nothing to hide. You know, I've spent some time with the SPAC sponsors and, you know, both during this project and in prior events in my life. And so I think they really believe, you know, they believe the dream. So, actually, I'm glad you mentioned SPAC sponsors because I went back. I reread the,

I reread the call when they announced, I think it was Ardius. It was Arteus. Arteus is what it's called. Arteus when they were merging with, when they were merging with origin, it was in mid-February. And one of the things they let off was, hey, we are a top-tier SPAC, right? Like, our guys have a great background. We raise 750 million, which is one of the larger SPACs ever raised. You know, most SPACs, for those who are familiar with SPAC markets, most SPACs from the 2 to 300 million range, anything above 7,000, anything above 500 is where you're talking about Liberty Media, Persian, South Bank. Like, these are the best SPAC sponsors. So these guys, clearly thought, people thought they were credible. They got 750 million, but I was hoping you could

dive into, you know, like, why were these top tier SPAC sponsors? What is that? their background. Why is this a team who, when they do diligence to this project and say this is a good project, you kind of want to perk your ears off. So the two sponsors are Charles Drucker and Boone Sim. Charles was the former CEO of World Pay, and before World Pay, the company was called Vantive Payments Company. I have a background in payments. And so he was a great CEO in terms of execution, capital allocation, and ultimately sold the company to FIS. I think that was in 2019. So just really, you know, well-respected executive. Boone, we overlapped at Credit Suisse. In fairness, he was group head and I was an analyst, so quite a few levels in between.

Boone left credit. So he ran global M&A at Credit Suisse left to become the president or head of Tamasic, North America, which is Singapore Sovereign Wealth Fund, and then ultimately started his own firm called Ardeus. And so, you know, the thing about, you know, they're experiences, they know how to do diligence. Like Charles at World Pay did a lot of MNA. Boone at Tomazek did a lot of MNA. And I think some of that rigor is showed if you read some of the deal documents about all the customer calls, et cetera.

It's a far cry from, you know, Barry Sternlich was on CNBC talking about a deal where the other SPAC did diligence at 72 hours and the deal was done. And Sternlich just said, you know, the only thing we can do in 72 hours is verify that the address on the, you know, on the letterhead is accurate. And so, you know, it's clear to me that they spent their time not only in reviewing other targets, but just how they diligence this, bringing in two consultants, doing all the customer calls. You know, it shows good process. Now, look, good process doesn't always mean it works out at the end. But I think it, you know, it's like diligence in a stock. You could just buy a stock and it works out. But if you really do your homework, you know, you hope it pays off. Candidly, so far it hasn't for me here. But I'm no longer at Citadel where my duration is short and I can take these VC type bets. Hey, look, that's part of being an investor, right? I think Mike Mitchell on the podcast I just did, he said, you know, it might have been before, but he said, look, if you can't take big drawdowns, you're not meant to be a concentrated investor. And, you know, part of the ability to generate alpha is being willing to look silly in the short term is what I would say. But I want to go, you know, again, and we'll talk more about origin and second. Let's focus on the sponsor because, you know, I do hear top tier SPAC sponsor. The guy did a great job running a payments company. They had finance backgrounds and stuff and everything. They do. They did real due diligence here, which, as you said, for a while at the peak of the SPAC mania, you would hear rumors that SPACs weren't doing any more due diligence than saying,

hey, how big can you make your projections in three years or something? Real due diligence, real team. But I do worry, right? We talked about payments and financing background, and they wrote a, let's call it a billion dollar check all in to fund a science project, kind of. So why did these guys focus on origin? Why should we feel confident? Because they kind of went, you would have thought these guys were looking to buy.

a catapult or a buy now, pay later, and instead they got, they got this really interesting tech, but, you know, it's, again, science project. So why was this a choice and why do you feel confident in their due diligence here? It's funny that the one spec he chose in that example is actually trading lower than origin and catapult. But I do hear you there, but, you know, that was just the first one that came to. It's a fair point. And I would say, look, Boone is not only like a payments guy. You know, when I was with him at Credit Suisse, like he was doing health care deals. across the board. At Tamasik, you know, I'm less familiar with everything new, but Tamasik is very big kind of across the board. You know, they're very big in ESG. So for starters, I don't think

we should kind of put them in such a small box. The second thing is just knowing how to diligence deals, you know, the reality is that you and I, you know, could have shown up to a bank in December and raised this back. And everyone would have said, of course, go right ahead. And so then we would have, you know, my background is public companies. I just don't have that background in diligent. And so for guys like Boone and Drucker that have done so much M&A in their careers, knowing, you know, sometimes it's okay to know that you don't know the answer. It's knowing how do you find the right answer?

And I think, you know, that's represented in bringing in the customers or sorry, bringing the consultants. And then you take it one level further, you know, these guys have all the corporate connections in the world. So being able to have those conversations directly with the Pepsi boardroom, you know, helps you really get some insights into an asset in a way that, you know, guys like you or I wouldn't be able to do. That's perfect.

That's perfect. All right. So I've mentioned that I think we've given a good overview of the sponsor. I think we've given a good overview of, hey, origin stream is we take wood or some type of stock and we turn it into basically the basics of what right now plastics and petroleum would use. But let's talk about where they are in the process, right? Because this is a company that was found in 2008.

They're just, I'll actually turn it over you. They're building origin one. They're building origin two. But they are no revenue right now. So I guess the two questions would be. what's the timeline for getting to revenue, for getting to EBDA profitability and all that. And then alongside that, you mentioned some of the customers they're working with, you know, how good do you feel about the backlog, the commitments and everything?

And we might talk about that in a second, but obviously specs have had a lot of issue with backlogs, commitments, forward numbers, and everything. So I want to make sure I address all that. So from a timeline standpoint, origin one is behind schedule. Like if you Google it, you'll find that out. And then the reason origin one is behind schedule. schedule is they ran out of money. They didn't have funding. So this fact- Let's just back up a second, because I'm worried I didn't describe it. What is origin one?

Origin one is the first facility. So when you think about facilities right now, they have like a demo facility in Sacramento where they can make product that basically proof that we can make product. Then the first scale plant, which is still going to be a sub-scale plant, it's Origin One, which is being built in Ontario, Canada, in Sarnia. And so that plant was started a few years ago, and it was supposed to be done, I want to say in 2019, maybe it's 2018 plus or minus, and they just ran out of money. And so it was one of the things that I came across too, you know, like this is a construction project, essentially. You know, why are they, you know, behind and they ran out of money. And that's why the SPAC deal is so important.

If you look at their prior fundraising rounds, they were just small in the grand scheme of a project of this magnitude. So origin one is expected to be online at the end of 2022. So I view that as five quarters from now, and I think that'll be a really important catalyst with stock. Origin two, from a timing standpoint, site selection by the end of this year, construction beginning in Q1, 23. You can't lock in financing.

I know this is a common question until you're about to start construction. So in Q1, 23, or maybe Q422, you'll also see that financing locked in. And then that facility is supposed to come up online in 2025 and you'll have a full year revenue in 2026. Now, as someone who's been around construction projects, if these projects are a quarter or two delayed, it wouldn't surprise me. It also wouldn't change the story.

I mean, another SPAC that I invested in, and I don't want to go too far off topic, but it was a cruise company called Lindblad. The deal closed in 2020, in 2015. I know Lynn Black, though. I think I told you about it. So literally the story was they had cruise ships running it, you know, over 90% occupancy and they needed SPAC capital for new ships. And the SPAC literally didn't show that in the stock price until the first ship hit the water. And there were delays, as there always are, but, you know, eventually ship one got in, ship two, ship three. And the stock worked.

And fortunately then, COVID happened. But before then, you know, you can, you saw like, yeah, it's frustrating. But if you're approaching this with duration, you know, they mentioned on their earnings call that things were running a few months earlier. But, you know, for me, I don't care if these facilities are, if you, when I say facility's origin one and two, are at run rate capacity in 26 or 2017. me, that's the same thing. So you mentioned origin one was supposed to be done in 2018, 2019. Now they're projecting by the end of 2022. How much, just to give people an idea of cost, how much cost is in origin one at this point and how much total cost will origin one cost? And then origin one is subscale. How origin two doesn't have a lot of money in it yet,

but how much will origin two costs just so people can start thinking about how big these things are? I'm going to tell you right now. I don't know those numbers by hand, which maybe I should, but that's one of the things about anything modern. You get paid for interpretation, right? You don't have to know the numbers off the top of your head. You get paid for interpreting. You can save the numbers in a

spreadsheet. So origin one, $70 million of Kappex. Origin two, just under a billion one. I'm not, it's a good question. I'm not sure how much of origin one has already been deployed. What I do know is that the modules have been, so

these are set up as modules, which again, this part's above my head, but really interesting. The facility is basically delivered in parts and then has to be put together, you know, run the electricity through it, et cetera, which Coke Industries is doing most of and turned on. And so, you know, 70 million for Origin 1, a billion one for Origin 2. And, you know, they put out a nice slide also. Here's how we're going to finance everything and some of the project finance assumptions, which we can touch on as well. Just to bring up a point you made, though, about, you know, the backlog and whatnot. So one of the things I talked to the sponsors about was some of the other deals they looked at

and, you know, this concept of revenue backlogs. And what they said was, you know, a few of the things we looked at, like the backlog numbers were huge, but you had to put down a $250 deposit. And, you know, I won't go into specifics, but if you, for instance, go for two of the EVs, when I was studying them, I made a reservation. I think one was Fisker and I can remember which was the other one at this point. And like you could put down, I think it was a $250 deposit and $200 of it was refundable. So to me, it's like, okay, well, I don't know how much I can believe your order book.

Now, with respect to origin, there's some stuff we know and some stuff we don't. So they just told us that the order book was $3.5 billion up from $1.9 billion when they put out their investor deck in May. So obviously a huge jump. But then the question is, how real is that? So if you look back at the investor deck, they kind of split out their order book, and they're not going to do this going forward, but they split it out between an offtake agreement and a capacity reservation. So the offtake agreement is a contract.

It's binding. And it goes on the customer's balance sheet. And these are big contract, right? These are $100 million plus contracts. And so they've said that so far, they've had 100% of their contracts transition from capacity the reservation to off take. They all have to transition for project financing. So again, you know, come that early 2022 date when, or sorry, early 23 date when construction set to begin for origin two, these will all have to move over. But, you know, right now we're seeing a big

increase in demand. A hundred million dollar contract needs its board level. This isn't some guy signing off on, you know, a couple of electric vehicles. So they are strategic, but until they go, you know, off take, I guess technically there, you know, I guess you could see a cancellation. Now, in my opinion, one of the things that hasn't been debated here is the demand, right? There is demand for this product. And so I don't worry as much about cancellations unless, one, we think the focus on carbon neutrality is going to diminish or two, there's a competitor. And while there may be competitors over time, everyone who's so frustrated with how long

this project is taking, I have to imagine what first mover advantage, competition is not going to be for quite some time, if there even is competition. Okay. Actually, that's great. So I have some more, you know what? I'll do my questions on backlog and then I'll move into some of the stuff about first move or advantage and demand you just talked about. So just on backlog, you know, I, so when they announced the deal in February,

I believe they said a billion in backlog, April or May investor day. It was up to 1.9, 2 billion. Q2 earnings come out in late July, early August. They say they've got three and a half billion. You've talked about how firm those are. It sounds like you think those pretty firm. I guess. So that tells us because as you said, a lot of spec, you know, you had the Fisker thing where we were getting into real debates over what the definition of pre-order and everything was. But one of my questions, it comes back to, you said I wouldn't be surprised if this construction is late by a quarter or two. I would say I wouldn't be surprised if this construction was late by a year or three. But if the construction is late, how cancelable are these contracts due to late construction, missed deadlines? Would origin owe any penalties, any fees or anything?

Because, you know, I could see a scenario where this is built by 2028, but all their orders are getting canceled or they owe huge fees to customers because they're too late. Well, to me, again, it comes back to the demand here, right? If you believe in the demand and a customer wants to cancel, well, you'll say, I mean, this is not how the real world works, obviously, but you would say like, okay, I've got the next guy who wants your spot. That's fine. So if you look at some of the filings with the SEC, they did miss some customer deadlines because of these delays.

And, you know, you've just seen them, you know, push down the road, no penalties. I think everyone here is rooting for success. I don't think Pepsi or Nestle or Mitsubishi care about some small penalty. They care that we have this target out there. We need to hit it. And we want you to therefore get product up and running as fast as possible. Perfect. Okay.

So we've talked about, you've talked about a lot of demand for this product, right? People, big companies want to go carbon neutral. They want to go carbon negative, right? Yeah. Lots of demand for a product. Let's not forget the pricing of carbon credits. So that's another dynamic too. I'll actually get there in a second, but agree.

So there's tons of, there's tons of reasons that companies once get carbon neutral products. And to get a product that in this case is basically plastic, except without the, except without the carbon. I mean, that's pretty much the dream. So I guess I don't doubt there's demand. My two questions there would be, you mentioned first mover advantage. They've been working on this project for 2008. So I guess my first question is how proprietary is this tech? You know, if they successfully do this, why aren't there hundreds of copycat things getting built? I guess it would take a couple of years. But they're basically making a commodity. Why is this process unique? Why couldn't this get ripped off and just kind of do what happens to all commodity players and drive prices down to basically the cost of capital cost of production? Sure. So It's a really important question, and it's one I was asking them, and I'm going to flip to my exact notes here, but basically they have an IP portfolio. So this isn't just purely like, hey, anyone can do this. Let's see if I can find my notes.

So basically, they have processed patents, which is they have the actual patent to get economic conversion between feedstock and the PET. That's covered by their patent. So the magic here is obviously that they can produce at the same prices. petroleum base, and they believe that process is patented. And they also believe that they have a lot of trade secrets. Now, candidly, I don't know those trade secrets because no one outside of origin should. And I don't have the science background to tell you, like, oh, this is, you know, Iron Pat. But what I can tell you is we've done calls with companies like DuPont and some of the other

chemical names. And they've based a lot of these big companies, they just don't have their R&D centers anymore. So they're not making these big development. So the simple answer, like, why isn't anyone else doing it is because it's really hard for DuPont to allocate capital to a project like this. It's much easier, right? If DuPont, if you read about, I'm picking on DuPont, right, whether it's DuPont or Chevron or Exxomobile, someone big in petrochemicals, if they invest $500 million in a project and it fails, someone gets fired, if not a whole division gets fired. But if you buy a successful VC business for billions of dollars, you know, you look like a hero. Like we're being greener. We're satisfying this need. And so I think those

are, you know, that's broadly across corporate America. I don't think that's unique to the situation. And it's arguably why the VC environment agrees. Like these companies have lower hurdle rate. So they pursue kind of less risky projects. And so, you know, the feedback we've gotten was if this is successful, it's more likely you'll see partnerships and M&A versus just outright competition. Now, I'm sure there's some places like China where there's a history. of, you know, IP being abused or whatnot, maybe there's risk there. But I think in places like the U.S. and Europe where, you know, IP protections are greater, you know, they shouldn't have as much of an issue. Yeah. You actually cut off my next question because it was going to be, hey,

you're going out and building, you know, these multi-hundred million dollar plants. If you've got proprietary technology and you don't really have a history of building these giant plants, why aren't you just, you know, licensing it to chemical players and having them build the plants? And, you know, that's super capital light. You could license it to 100 plants. You could be making a lot of money. So that makes sense. Just to add there, I think that's why proof of concept is so important, right?

Like one of these big chemical companies, for the same reason, they don't want to develop this in house. They're not going to say, like, oh, sure, we'll build you a plant and do a licensing deal without you actually showing that it could be done at scale. And so, you know, at the risk of moving this more towards stock top, like when I think about what are the key catalyst, I think the biggest thing is getting origin one up and running because if you can prove that we can get origin one up and running, you know,

within and, you know, hopefully on time, but within, you know, if you go a little over, hopefully just a little bit, hopefully, you know, within budget and then deliver products at the economics that you forecasted, then all of a sudden you've de-risked the future. And so now all these big players can say, like, we want to partner with you, we want to buy more from you, et cetera. Like, it really changes a narrative to, is this commercially viable, how much construction risk is there to how many of these can you stamp out? And I think about it at that point, I laugh at what I say is it turned into a restaurant at that point. You know, it's like Chipotle in the early days, like we know we have these great

unit economics. How many of these restaurants can we stamp out? You know, once you prove one of these facilities up and running, you know, you got to multiply the CAPX numbers quite a bit, but it's no different. You're just stamping these out wherever you can. And so I think, you know, I don't think this is a story about waiting until 2027 for Origin 2. I think once they prove that Origin 1 works, you know, the story is really de-risk. And conversely, if Origin 1 doesn't work, you're going to know then and there that, you know, this probably isn't going to be worth your time as an investment. That's perfect. I want to talk about construction costs in a second, but let me just talk about demand real quick. You mentioned, you think the demand is there. I don't, I don't

disagree with you. I think companies want to go carbon neutral, but one of the big places I've run into problems, and I noticed this in the calls where they said, hey, we've built into our models that we're going to get, you know, I don't know the exact numbers, but if plastic feedstock costs a penny, we're going to get a penny and two-tenths of a penny or something, right? They said they had built in a little bit of a premium because they are a carbon neutral thing. I hear that. It makes sense. I know companies are willing to pay up for it, but I've always just kind of been of the opinion, and I think I've seen this play out several times. When the rubber hits the road, if your ESG material is a little, if your ESG input material is a little bit more expensive than, you know, the traditional plastic material or something, when the rubber hits the road, a lot of times you will have trouble getting people to switch over because, you know, companies, they're economic creatures and there's tragedy of the commons. They just want the cheapest input. So my two questions are, do you feel comfortable with that assumption? And if you don't, or even if you do, if this is kind of cost neutral, if they're selling at the same cross.

as a traditional petrochemical input, can this thesis still work? So in talking to the company, they always say we don't want to price as a material premium because we want to scale this business. What we want is to look at the cost of existing PET and look at the cost of the carbon credits. And basically, we want to split the carbon credit with the company. That's how they view. Now, they won't go into the weeds of is that a 50-50 split and 90-10, et cetera.

But I don't think, you know, when you look at their pricing versus Dan or PCT, you'll notice Danmer or PCT, the pricing is much higher. And, you know, their product right now is recyclable and for origin that's supposedly down the road. So if you want to place value on that, but their goal is just to be the scale provider. They don't want an excuse. And I was trying to find it in my notes. They gave the number for what their break even is relative to oil prices. And I want to say they're cost competitive with like $20 oil. So they really have some flexibility here, even in a, you know, down market for petroleum. Perfect. Perfect. I saw construction cost, right? Because as you said, this could come in a quarter

or too late, and you wouldn't be surprised, you know, my experience with anyone who's building a big plant, especially a little house. Or a little house, but especially something novel. You estimate it, and then when it's done, you know, MSG, they're building this sphere out in Las Vegas, which is going to be the most technologically advanced concert venue in the world. And they came out and they said $1.3 billion. And as soon as they said that everyone laughed at them and said, no way, guys, that's going to be, by the time it's all said and done, it's going to be $2 billion. And MSG kept defending it, kept defending it. And then every quarter, their cost estimates would creep, creep, creep, creep out. So I guess my question here is, you know, they say, hey, we've got enough cash, we've got enough capital to fund origin one and origin two.

And we have 100 million left over to go for origin three through six, but we'll figure it out once we get origin one and two built. we'll talk about the funding in a second because I think there's questions there as well. But just on the costs, what do you think about their cost assessment and how you get comfortable? Because I know you've done work here. I'm asking the leading question. But how do you get comfortable that there's not going to be massive costs overruns here? So honestly, to me, the biggest risk here is construction, whether it's on the pricing or execution or just the whole thing. There's real construction risk.

And listen, you can hire the best E&C companies, which they have. And I don't know if you felt this way or not, but I felt like their second quarter deck was a lot of need drop. Like we want to show you who we're working with. And so from my standpoint, you know, my estimates are going to be no better than the best E&C companies in the world and from, you know, the consultants involved. And look, we've gone through a big inflation cycle, right?

Like you're hearing it across the board. And so, you know, if inflation massively increases from here, you know, could there be cost overruns? You know, technically that's right. In speaking to the company, the two data points that I can share are they price everything based on commodity levels in 2019. So whereas we're seeing all this inflation because we're really comparing against these low base effects of 2020, they were a bit more conservative in their assumptions.

And the other thing is, you know, whenever we talk about a specific assumption, it just feels like there's a lot of conservatism. So I don't want to say there can be no cost overruns because historically there are. And within that $100 million excess, I know that they already have modeled in some cost overruns, but it is real. That's a real risk. And I think, again, that's one of the reasons we need to watch origin one so closely because if origin one comes in 50% over cost, we're going to get worried about origin two. But if origin one comes in at or around budget, we're going to say like, okay, they have a handle on things. And their forecasting methodology is accurate.

Like to me, this is all, sorry, go ahead. No, no, no, please finish. going to say a lot of this is a test on management's ability to forecast. We've seen in so many other spas that they either have no idea or they've outright lied. And so the first big test here is going to be origin one on time and on budget. Do I remember, so Coke is doing a lot of the, is doing a lot of the construction here. Do I remember that they've got a guarantee, some type of guarantee from them on the deliverables and the. Yeah. So when I learned this, if you could have seen my face when I was on the call with them. My jaw basically dropped because to me, someone who's not in the construction

industry, that just seems like such a big deal when we're talking about like the main risk here is construction. So I'm just putting out my notes right here, but so Coke modular is basically running the process and they're just top in the world at building small and medium size factories. And so they gave a performance guarantee on the hydraulics, thermal, and mechanical performance of the plant, which, you know, according to the companies, an expression of how confident they are because they really do this. And the other thing that they said that I thought was really interesting is they said that Coke would be like a dream conglomerate to partner with down the road. And if they've had a relationship forever, but they've never, you know, formalized it outside of this project. So I heard that and I said, like, okay, am I really worried about construction for no. reason? Like, yes, to me, again, I keep it back. That's the big risk, because I'm competent

in the demand. But, you know, if you have co-kind of guaranteeing your facility, that's, and again, this is for origin one, not origin two. So just to clarify, but, you know, for me who views origin one as this big catalyst, like that de-risks it quite a bit, in my opinion. All right. So I've got some stuff around the SPAC process that I want to walk through. But I think we've done, I think we've covered a lot on demand, construction, a lot of risk here. But I just want to pause here for a second. Is there any big upside case we haven't hit? Is there any big downside case that you feel is important to understand that we haven't hit? Anything on the origin side that we haven't hit yet? No, look, I think the market for the most part, like there's some

skeptics on the top wide, but I think that's more of a function of the other specs. And people get it. Like the risk here is, okay, you have this, we believe it. Like, everyone wants to go carbon neutral and carbon neutral at the same price. Like, that's easy to understand. Like, can you actually execute it? And that's construction and financing. The financing assumptions I feel fine about right now for two reasons. One, you know, just there's a lot of liquidity out there. So we know, you know, these projects are getting done and levered up. You could see in PCT's presentation that they outlined an 80% debt to equity mix for their plans going forward.

And even with the new post-redemption structure, you know, origins at 70%, 75. So that seems reasonable. you can, you know, if you talk to some of the project financiers, you'll see that, you'll hear from them, that's all reasonable. So if you'll find about that, but to be clear, the risk is, you know, if you have some Black Swan event between now and locking in the financing, could the markets get tougher? Absolutely. And so that's why that stays a risk until, you know, financing is locked in, but based on the state of the world today, you feel okay about it. And on construction, you know, they have to get it done, but you know you have some mitigating factors in Coke and some of these

other companies that they announced on their second quarter call is, you know, best in class builders. And then, you know, the upside, sorry, just to jump there, like at $5 a share, I'm not really worried about the ultimate upside. Like whether you say, you know, 50 or 100 and, you know, I'm going to just, you know, DuPont trades at 10 times EBITDA. There's a company in Europe that's doing something similar in terms of biofuels. and it's called

Nasty and that trades it 20 times EBITDA and again if once you prove one of these out it'll be off to the races and growth and partnership so I think it will trade higher than that but you know you take any number you can haircut management's numbers put any multiple on it and you get

just really attractive upside from these levels let me ask I wonder you go through some you know I see I've written a lot on the blog about the SPACs that I think are positioned to do well and SPACs that I think are positioned to just try and take money and run. And I can see some of that on both sides origin. But let me put this side. And I just want to talk financing real quick. So they originally were going to, you know, Ardeus was a $750 million spec. I think they got $200 million in pipe alongside

the SPAC, but there were tons of redemptions in the SPAC. And they came out and they even published a slide that said, hey, don't worry, even though our redemption came in, way higher than we thought. We still have enough funding to make, we have enough funding to get through origin too. And the reason that they said that was they shifted a lot of their funding from cash staying, cash coming in from the SPAC because all that got redeemed. They said we're going to do with project financing, right? And I just found their language and everything around the project financing a little strange because, you know, project financing, the way they were saying it, when they say, hey, we've got, we've got origin one and two funded. You think it's committed project

financing. But I think you said earlier, they haven't even chosen a site forge into yet. Like, I don't know how they could have committed, committed project financing until at least they've got a site until they start breaking down. So I just want to talk to you about the funding. How committed is this financing? How real is this financing? Because you're worried with all specs is it goes back to the orders issue we talk about, right? They say, oh, we've got a million orders, but it turns out those orders were, you know, LOIs, non-committed. Do they have, oh, yeah, sure, we'll give you financing, but there's nothing on paper. And they, when it comes. science of finance origin, too. They're in trouble.

So it's a great point. So let's start with the slide that they published. You know, to me, the big problem with the slide was they, you know, they have a February 2021 and a June 2021 side by side, but they never actually disclosed the project financing assumptions in February 2021 until this slide. So we look at it and we just say like, oh, you're just moving money around. That's just Excel math. Like we feel misled. And I don't think that's an unreasonable point of view. I think what happened here and, you know, I try to get them to admit it, but they won't. I think the SPAC was too big for this deal.

And so if you flip this around and said, okay, when this deal was announced in February, it was the hottest pipe market of all time. You saw just these $200 million spas doing these huge pipes, like Owl, which is, I don't even remember the SPAC ticker, but OWL was like a $200 or $250 million spack with a billion five pipe. And so this pipe, I could tell you, it wasn't one of those where banks it's a call in favors. this was a lot of, you know, guys getting scaled back and they only did $200 million. And so I think what happened here was that SPAC was too big. If they raised a $500 million pipe, you know, the numbers on the left would have looked even more ridiculous.

Like at some point, you want to optimize the financial structure too. So if we took the, you know, the project financing, I haven't done this math, but if we take the 558 in the February 2021 column and look at like the leverage, we would say like that's inefficient, that's too low. So in my opinion, they had to have conservative assumptions because the SPAC was just too big. And that ties in with why the pipe was so small. And, you know, what would we be saying now if the SPAC was half the size and now set that in the pipe? You know, it wouldn't even be a conversation, which is, you know, just the irony of how markets change. In terms of your question on how committed to financing is, you know, for any of us who've had a career doing mergers and acquisitions, you know, you go to the bank and you say, I want to buy this company. can I finance it? And they do a bunch of work and they say, yes, we think you can finance it.

And they'll say, okay, is that financing committed? And in order to get the financing committed, you basically have to start paying the bank and signing a contract and have your plan for, you know, here's when we're announcing the deal. And in MNA deals in that scenario, that happens, you know, weeks before the deal is announced. And so to some extent, it's very similar to how, you know, the project financing here works. Like you can go to them now and say, if we want to do this project, but I'll go do the work and say, like, okay, we think that's very achievable. We think here are the ranges of debt you could take on. Here are the ranges and rates. Obviously, they won't share it with us, but this is what I know they're looking at. And only when it gets

closer, you know, that's when the financing gets committed. So if you have a, you know, 2008-2009 type event happened between now and locking this financing, like that's a real risk. I would call it a low probability event, but it is absolutely something where all lending stops, well, banks are going to say, like, well, we don't care, you know. So to that standpoint, I would say, like, you know, they are as the ability to raise capital is probably as high as you would think right now, but, you know, right now is not the beginning of 2023 when it's going to be committed. Okay, perfect, perfect. Let's see. They, at scale, they're projecting EBITDA margins of 60%. I'm not a chemicals analyst, but that does seem pretty high for, you know, they're making a

commodity, they're making a commodity input. Yes, it's, yes, it's ESG. Yes, I think there's demand for it, hopefully proprietary process, but 60% seems pretty high. Could you just talk about that long-term margin outlook? So in the little bit of what I've learned about the chemistries, most of these specialty chemical companies take refined inputs and create more refined outputs. The big difference here is because you're taking pulp wood, it is an unrefined input. And then you're making a refined output. And so because of that dynamic that there's no refining them beforehand and the product is just so the input is so cheap, that's what it counts for the 60% margins. So theoretically, even if we ignore, I mentioned earlier the risks around, we're going to get

a premium because we're going to split the carbon credits or anything. I mean, theoretically, these guys should be the lowest cost producers of all the inputs they're making because they're using a much cheaper input to make their own input. In theory, that's exactly right. And I'll tie it back to Origin 1, right? Right now

we can have this debate and I can tell you like, oh, it's because you know, you're comparing refined, refined versus refined unrefined and to me and to you, that probably makes sense, but we still want to see it. So, you know, origin one, you know, actually proving that concept, I think all of a sudden everyone's going to say like,

okay, this is interesting. Let's go back to Scame Public Through SPAC. I've been keeping track of things good and bad with SPAC. Some of them are all bad and some of them got a lot of good in it. And I see both sides of this. So I just want to walk through some of the stuff. And we've already hit on some. But the first thing, we talked about management here.

This was a big spec. They said, hey, we were top tier SPAC. So we had access to the best deals. There was a pipe that had very credible, strategic and financial investors inside the pipe. It was a nice size pipe. but I don't believe I saw management putting any real equity or any of their own capital behind this deal. So I just want to talk about those dynamics real quick. So Charles Drucker, one of the sponsors, he was buying in the open market at 10, which makes me feel

better about some of my buys. And it was pretty big buys, too. I'm seeing they were in May and June, and I think he bought about $7.5 million, as you said, around $10 per share. Right. And then actually last night, I think it was Boone and Rich Riley bought some stock on the open market as well. So you've had some insider buying. They must have known that we were going to talk about them today. Obviously kidding. But it was, yeah, Boone and Rich last night made some open market purchases. So about a half million between the two of them. Yeah, I've got a little screenshot of all the open market purchase, which for those who aren't listening, you know, open market purchases, I'd say are rare across the spectrum. But especially in SPACs. world open market purchases have been pretty damn rare but so so i have i have an interesting statistic for you someone just sent this to me um eight out of 80 companies that ipoed in the past year sorry eight so 80 companies ipoed in the past year are down 50 percent in the past six months and only eight of the 80 have seen insider buy so to me it's like a nice sign that you know

you're willing to step up and listen i i mean i don't want to take this too far off the rails and talking to SPACs. We know sponsor economic math. We know, you know, you know, the sponsor are here for a low basis. So, you know, putting in more capital, considering the size of their stake, I think it's a nice show of confidence. You know, so I talked about the bad. They didn't put any, they didn't really put any new equity in the SPAC sponsors, but they did open market purchases. I guess I also want to acknowledge the good side to Apollo came in here when the SPAC was, you know, it's never good when redemptions run so high that you need a backstop. But when they needed a backstop, Apollo came in, wrote a nice size check, got this over the finish

line, and they didn't really demand too much for, you know, if it was, honestly, I was shocked at how cheap they did it for. They did it for a 3% fee, which. Can you give some more background on the Apollo and kind of what they demanded, what they got, what they did? Sure. So this is all publicly filed. They got a 3% fee for providing capital and they put up 30 million bucks. So if you think about that on a, you know, on a per share basis, they were buying it 970. versus 10, it's really not a big deal at that point. And so an Apollo subsequently wrote, they put out an ES2 report annually. They talked about origin. So I just thought it was interesting that clearly they saw value, you know, I'm sure they don't feel so great about it right now,

but they saw value at 10 that they were willing to put in this capital at, tighter, at, you know, only a 3% discount. I've actually talked about how I think pipes need to evolve and we can have that conversation separately. But it just goes to show you that you have some of the smartest investors in the world willing to commit it, you know, much higher prices. Yeah. And Apollo's doing the work on construction. They're doing the work on, you know, the viability of these projects. So it's just when you think about who's checked off and who's kind of signed their name

to this works, besides like the original Pepsi Denona and Nestle, besides the consultants, you have, you know, guys like Apollo, guys like Capital Group, guys like Barron Capital. So some pretty sophisticated investors also kind of, you know, rubber stamping it, so to speak. The more I thought about it, I just thought the Apollo writing that check was probably the most bullish thing I'd seen in a SPAC because, yeah, it's not a crazy large check, but it's a $30 million check. That's a meaningful size. And they came in, they basically did it at 3% discounts of trust. They basically did it at trust. We're 50% below that price right now. So you get a pretty good. But the fact that they were willing to come in and do that, it said to me that they had done serious work on this and they saw the story. I just thought that was really. really bullish. I would also add, as we talk about financing risks, well, now you have as an investor, and I'm sure there's a relationship there between, you know, the sponsors and Apollo, like, you have arguably the best financing firm in the world. So that's a pretty good place to be if you want to talk about, well, what happens if we have a financial crisis between now and then?

It's like, well, you know, maybe the terms are a little worse, but you have someone like Apollo in your pocket that has, you know, hundreds of billions of credit designated assets. Like, that's a good relationship to have. Yeah. And, you know, most of the things where I've seen people come in to backstop or save a backstop are, oh, we're hitting, you know, convertible debt that pays a 6% interest rate and converts at 1150 or something, which that's extremely expensive paper, right? You've got a free call option. There's lots of cash that's coming into the company from the pipe and everything and anything that remains back. So that's great paper to have if you can get it. Just the fact that Apollo was coming in for a straight comment struck me. It's pretty good.

let's go back to some of the bat. I think if you just showed me origin in a box, nothing else, I would look at it and I would say, oh, this is a SPAC that this is a SPAC that's buying a science project. It was announced mid-February, absolute height of SPAC mania. And you know, you mentioned in their Q2 slides, they had name dropping left and right, all of these things, which I get you want to show the credibility of your project. But at the same time, whenever you see all these name drops for something that it's probably a lot of civil. and not quite a lot of stake yet. You get really worried. And their deal deck include a comp to disruptive tech, which the comps that they had there were beyond meet, plug power, Tesla, Sun Run,

and desktop metal. And you say those five names and you say SPAC at the height of February. And you go, oh, I know what they're comping to every meme stock. I know what they're going for. So I just see a lot of red flags circling around there. And I'm hoping you could maybe, I know through a lot out there. I'm hoping maybe you could help me address them. So I'm sure I'm going to forget parts of that. question. So just please remind me. I'm not trying to dodge any of it. I'm just the king of seven part questions right now. I'm just throwing everything else out. You know, it's like one question in 27 parts, like back to school. So what I thought was interesting, and I talked to them about, you know, okay, you like ESG and key themes. Why not EV for instance? And they said, well, two reasons.

Ev looks like one of those areas where there's going to be one or two winners. Tesla seems like one. I don't know who's going to be the other. And the multiple at the time were absolutely crazy. And you look at, and they have arguably just as much execution risk as origin does. And you look at origin and you say, like, okay, if I look at EV to the, you know, 2026 base case EBITDA. I know everyone's going to jump down my throat percent 2026, but everyone's doing the same for the other specs. Let's be like for like and we don't have another basis. It's trading it under three times EBITDA. So to me, what was interesting about this is, you're again, you're not making a bet on valuation.

This isn't like, oh, I'm buying something at five times revenue. the comps are at 10, so hopefully it goes in between I make money. This is binary because you know if it works, it's not trading it 2.7 times. And even if you cut that EBITDA in half, it's not going to trade it five and a half times, right? So I think from the standpoint of, you know, this was announced in peak spec, I think that was true. I, like I said, I think they did themselves a disservice by not getting the peak spec pipe, but, you know, again, that aside that's done. So I don't think valuation is an issue here. And these guys are very valuation oriented, you know, having run fintech companies, which are like the ultimate

garpy investment. So I'll say that's part one. Part two on the name dropping, you know, they're name dropping because they're stocks at $5, in my opinion. This isn't like, we want a name drop, we want to both fluff. This is like, look, we get it. Our stocks at five, the market's telling us, you don't believe us. Let us add credibility. We've already told you about our big customers. We've announced things with arranges with Ford and Palantir. You still don't care. you think there's risk on construction and again that's where i think there's risk so you know i think from their standpoint it was let us show you how we're derisking construction risk and that's by talking about you know we have some of the best engineering

companies and you know all the various uh counterparts to this project so your point on this is a science project like yeah like you could say it's a science project but how did they elevate the science project well they know that the biggest customers you know have demo the product they know that they've had the consultants check it out they know from their customer calls that you know this is real demand is there so what arguably started as a science project as you called it has been diligent and assessed for its viabilities of business and again to me they obviously feel good about it they did the deal to me i think it's great because you know it's just as execution risk on construction which i feel okay about i mean remember what's also

unique here is this isn't one of those situations where you're wrong, the SPAC goes to five and the sponsors bail. And we can have this conversation if we see sponsors selling. But if the downside case is zero, that means the sponsors actually lose here. That's not the case for a lot of these others. Like their basis is super low. You can do the max and figure it out. But if the bear case here is zero, like they will lose their, you know, $17, $20 million, whatever they put in. Whereas some of these other deals, it's like, oh, the SPAC goes to six bucks. The sponsor's still up 5x, and, you know, they're going to try to get out as soon as they can. Yeah. Sorry, it didn't mean to get off. Go ahead. So I think that cuts both ways. Like, the bare case for us means that the sponsors

could actually see impairment. Now, again, if you see Boone and Drucker and Rich selling at, like, you know, at the current prices, we should say, okay, like, they're clearly running away. There's a problem here. And I think the stock gets killed on that. But, you know, the fact that they're buying knowing that like hey if we get this wrong like we lose everything i think that's that's pretty powerful and shows you you know they're mindful of the upside and this isn't just a financial engineering transaction for that perfect well i want to be mindful of time but i also want to make sure i feel like we've done a great job covering a lot of origin again this is a it's a little bit of a science project and neither of us are scientists but they put out lots of stuff on their website and

everything people can go check that out for diligence don't you but is there anything you think we should have covered with origin, bear side, upside, bullcase, anything that we missed? Do you wish we had hit? I don't think so. I mean, listen, I love doing these debates. And when I'm on Twitter and I get these bears coming at me, like, I love it. Like, I'm a classically trained investor. Like, I want to know the other side because if you tell me something, I'm going to go

research it and I'll end up feeling better or worse about it. And so I like hearing, you know, I don't like these guys on Twitter where like if you criticize them, you know, they blocked you or whatnot. For me, I want the criticism. I want to know what I'm missing. I want to know what questions to go back to management with or to go back to other investors. So I really enjoy that dialogue. And I just think, you know, what's important here is for most stocks, you're thinking, like,

how do I make 20% while only risking 10? And getting that two to one skew is usually a pretty, you know, classic long investment. And here, that's not what you're getting. You're going to get, you know, 100% down. You know, you can pick your multiple up. So the skew still looks good, but the real risk of impairment is there. And you have to decide. One of the more interesting conversations I've had on origin was, okay, Lewis, say you're right.

And let's just say for the sake of argument, the stock is going to be worth 50 or 100 bucks. Why don't I buy it at 15 when Origin 1 is like up and running? And my response is, well, I don't know if the stock will be at 15 or 750 or 25 when Origin 1 is up and running. I just don't know. But the notion that I'd rather trade this to have less downside and less upside, that's not wrong. Like that is, that just comes back to what level of risk are you comfortable with. You know, at this point, like, I want to dream the dream and say that this could be up, you know, 10, 20x, but I know it could be down everything. And if you want to wait to the point where maybe it can be up 3x, but only down, you know, 20, 30 percent, I respect that.

Like, that is a personal decision on your risk tolerance. And it's one of those where, like, keep this on the back burner and keep, you know, watching how they execute. You know, I respect that. I would just say, this is probably just me and my own feelings psychologically as an investor and everything. But every time I've heard someone say, it's at 10, right now it could be zero or 50. I'm going to buy when this is de-risk a little, right?

When we've hit point A and B, and yeah, the stock might be 25, but at that point, the downside will be 20 and the upside will be 60 or something, right? And every time I've heard someone say that, and again, theoretically, the stock price was at 10 at the time, I don't know a lot of people who are able to pull the trigger at 25 when they were looking at at 10 and they said they'd hit point A, B, and then they'd buy it at 25. Maybe that's right. It's very hard. If you come back to like VC terms, it's like, all right, the guys who are in the series B come back bigger in the C and they come back bigger in the D. It's not really different.

what I like to do to keep myself intellectually honest is write it down, right? Like I will say, in general, like, I have sized this at a level that I am comfortable with, and I will be more comfortable taking it on when Origin 1 is up and running. And I will therefore take it from an X percent portfolio position to a Y percent portfolio position when I see that catalyst happen because I at least know this is moving in the right direction. I've been over an hour, want to be cognizant of your time. I think we hit everything in origin. I know you follow a lot of other SPACs, though, just if people are looking for other places to research,

if I'm looking for the next podcast to have you on for, what are the other SPACs that are kind of, or I guess it's DSPACs, but what are the other SPACs that are going to? I mean, honestly, we can talk about the market more broadly. I actually think Catapult after its implosion could be kind of interesting, which, you know. I tweeted this out. I know you saw it because I think you liked it, but they had an excuse, hey, we had to cut, we had to, you know, they did the typical. we despaqed and we slash guidance. And they said the reason we're slashing guidance is all of our firms we were selling into their IT staff when they were told you can't work from home anymore.

They up and quit. So the IT staffs we wanted to integrate with weren't there. It was maybe the stupidest excuse I've ever seen for missing guidance. Well, so I don't trust the management team, which makes it hard for me to invest. But what I will say is if you look at their performance versus Wayfair is U.S. performance, it's exactly the same, right? And Wayfair is 70. percent of their business. So it's not really surprising. Like 70 percent of your business goes down. You're going to go down. Your biggest customer withdraws guidance, you're going to be forced to withdraw guidance because if you maintain guidance, you're either lying or you're telling something about your customer that they don't want to admit. But if for a second, we believe

that the street estimates for Caterpult are accurate, sorry, for Waifer are accurate, and you kind of overlay them onto Caterpult, all of a sudden you have a really cheap stock that's going to start growing again next year. And it has no debt. It's cash flow positive. So it's kind of interesting. If you believe that this is just like a tough comps from lapping e-commerce versus a structural broken business, I think the stock trades at six or seven times normalized EBITDA. So I'm not there yet, but I can see why there's a reason to do more digging.

For me, what's been, you know, frustrating is if you look at all of the SPACs that have closed since April 1st and what has happened to them on earnings. So 39 of the 61 SPACs or 64% traded down. And even the SPACs that revised up 2021 guidance traded up an average at 1%. So if I want to put my fundamental stock picker hat on, you know, why do I want to be picking stocks where if they raise guidance, I make 1%. If they maintain, they go down 3 and heaven forbid they, you know, reduce or withdraw, they're down 16.

So when I frame the universe, it's like, all right, this is just. you know, ridiculous. And, you know, whether you like origin or not, I thought the actual quarter was really great. They gave you all positive metrics, all the updates were good, and the stock still faded hard. And so, you know, again, if you didn't like origin before the quarter, you don't like it after, if you like before you got more data points, but just dynamics like that where like it got better, but the stock can't power through. I just think that's a really bad SPAC dynamic. And I was looking at some performance metrics year to date. You know, we know that people are like, oh, small cast at a tough time. Well, the Russell's actually up, this is as a few days ago, but let's call it 12%

on the year. And SPACs have underperformed by 3,600 basis points. So I just look at it, and I think there's going to be a lot of really interesting kind of value plays to buy off the bottom and some baby with the bathwater. But I'm also not willing for too many names to step in and, you know, swim against the stream. Yeah. And just, I guess I'll add two things there. For listeners, we were talking about Catapult earlier. Catapult is a buy now pay later company. They actually, most of their businesses from Wayfair, and what they do is if a firm, who is one of the larger buy now paylators, they've got a partnership. If a firm says we're rejecting this loan because Lewis's credit is too bad, we can't lend it to them, they pass it over to Catapult and

Catapult kind of does subprime, buy now, pay later. And until they got, until they gave that awful earnings excuse and got absolutely slaughtered, I think most people would have pointed to them as an example of one of the better SPACs, right? Because Tiger Global wrote a big check into their pipe. They came. They were growing. They were profitable. And they announced in December, which is kind of before the real SPAC mania got really crazy. So you said, oh, it probably announced that a reasonableish multiple, big, big serious investor into the pipe. But I mean, that thing, it was one of the worst excuses I've ever seen. And then on your thing with earnings, you know, I've written before about iron source, I.S. That's a, you know, their revenue retention rate is like

150%. They're growing 30, 40, 50% year over year. They've raised guidance twice. They just announced a great Q2. They raise guidance and the market just doesn't care. And I'm with you. There's a lot of, you know, there's babies thrown out with the bathwater. I think there's definitely a few babies thrown out with the bathwater. But most of the bathwater is really turning bathwater here. Oh, I 100% agree. But it's funny. In February and March, I was making my list of, like, what are the names I'd want to short? And that may be a dirty word for your podcast listener, so I apologize. But you could just feel that euphoria that you feel in any cycle.

And now I find myself making lists of like, what are names that I want to own? And even something like a mudrick with tops. And it's traded well the last two days and it's coming into its deal boat. But this is a stock now that's raised guidance three times before close and trades at 11 bucks. And it, you know, it's a real business with cash for it, a reasonable. multiple, the market just doesn't seem to care. And so you have these like negative technicals, you know, I think the question of when do you start buying these, I don't think that's an easy question to answer. Even something like a light, like I, you know, I'm a Bill Foley fan. And, you know,

the stock is now under 10 and they've raised numbers twice. A light. Go ahead. And it's a cash flow machine. It's a cheap multiple. You know, there's really a lot of things to like here. And my view on something like the light is own the warrants because, you know, they'll make good decisions and over that five-year duration, you know, or whenever they take them out, like you'll probably make some money because it's just a cheap form of leverage. But, you know, for, you know, I'm looking at the valuation for a stock that traded eight and a half times EBITDA grows organically and has raised guidance twice. Like, that just seems like a lot of hate when, you know, the peers have, you know, seen a lot of valuation expansion. A lot of these deals going back to your point, they're priced in

February, you just look at where the comps have traded its way down. And so you can argue like, oh, the comp are down 30%. So sure, the deal closing at 10 and going straight to seven, that makes sense. It's just doing what it couldn't do as a SPAC, but a light, you've only see the comm still up. And so, you know, I've written about a light on the blog, yet another value blog. I never mentioned on this podcast, but get another value blog a couple of times. I will, I'll put, I'm putting my money where my mouth is full disclosure. I'm long, but not in crazy size or anything. I'm a big, big, fully fan as well. I think a light is going to be sold before the end of this year. So if you, I wrote about it a couple weeks ago for, if you look at

Knais' Q2 earnings, which came out earlier this month, they said we think the best risk reward in our portfolio is a light. Knai actually stepped in and when redemptions came in too high, they invested a lot of money to cover the redemptions. Last week, an article broke on Bloomberg that said Voya is looking to buy a light. And then if anybody looked, it was either yesterday morning or this morning, a light filed an 8K that updated. all the change of controls for their top management team. So I think Alight is actually pretty likely to be sold. We're talking this August 19th, so people can come to time stamp.

You know, it's a hard thing about the hard thing, though, about a light. So I got really excited about the deal, too, obviously, who wouldn't. But what's interesting is if you look at, like, if you think about the timing of how long an M&A deal you should take and the fact that fully voluntarily bought stock to, like, fill the redemption void, you have to think that no conversations were going on at that point. I disagree. Because he's not buying stock on the open market.

He's buying stock to fund the redemptions and he's doing it in a deal with the company, not on the open market. So one of the reasons I'm always really interested when a sponsor funds redemptions is because they can do that owning material non-public information. So that's shocking to me that he could buy a 10 and in theory the next day sell it at 14, right? Look, I'm not a lawyer. Nothing on hears the advice. Nothing on hears the best advice. Everybody should remember that. But my understanding of the way the rule works is a sponsor buying from a company or its cover redemptions is not an open market purchase. So you can do it with material non-public information. In much the same way, you know, if a company was going to do a pipe deal, they could come and they could give you all your material non-public information.

You're buying from the company. If they give it to you, you can do it. So that is my understanding. It's interesting. It's not a guarantee. I want everybody to be very careful. Understand nothing's investment advice. But, you know, at a minimum, I wouldn't be surprised if the company was saying, hey, you know, Foley was getting weekly updates on how the business is going, that projections, and he decided to fund it. I would not be terribly shocked if he knew that there might be a little interest from VOIA. Doesn't mean, hey, he might not even want to sell, right? If you look at his tracker, could you guys? I know the big a light bulls, the stock's worth like $18. And so I doubt you'll see anyone come in. and pay, let alone Boya, you know, 100% premium. But, you know, it's good to know, obviously, that there's strategic demand for an asset. I actually think one of the things that will turn around the SPAC market, and we're way too early for this, is you'll start to see some of the strategics come in and, you know, GM will decide, like, oh, this one EV company is actually not bad when we pick that off because it's trading at a depressed level. And I think as you see

some, you know, strategic interest, you'll probably start the next cycle that results in exuberant prices and then back down. But, you know, you need something like that as kind of a blessing that there is some gold in this pond. You're probably right. And you've seen it a little bit with draft king's bought a golden nugget, right? And that was a very nice premium. That was a very nice multiple number.

But yeah, it's probably going to take a couple buyouts, a couple of companies actually coming and saying, hey, we're going to meet our numbers. This is pretty rare for respect. But cool. Lewis, I got to be cognizant of time. Anything lingering on your mind? You wish we had addressed here? No, really.

I appreciate you hosting me. and hopefully we can do this again soon. Hey, I appreciate you coming on. I'm going to put Lewis's Twitter handle in the show notes so everybody can go and give them a follow on Twitter. And Lewis, thanks for coming on. We can go from there. Thank you.