We are short Li-Cycle Holdings Corp. (“Li-Cycle” or the “Company”), a battery recycling SPAC trading at 96.8x LTM revenues on the promise of a low cost, low capital expenditure recycling model. But such promise is a fiction. In our opinion, Li-Cycle is a near fatal combination of stock promotion, laughable governance, a broken business hemorrhaging cash, and highly questionable Enron-like accounting.

In our opinion, Li-Cycle recognizes revenues using an Enron-like mark-to-model accounting gimmick. Li-Cycle recognizes revenues months prior to the actual sales of its recycled black mass, based on its own provisional estimate of the future value of the product. This accounting treatment is plainly vulnerable to abuse, giving Li-Cycle discretion over its reported revenues. We suspect that under this framework, Li-Cycle marks up the value of its receivables on unsold products and runs the gains through its revenue line. In the most recent quarter, we calculate that 45% of Li-Cycle’s revenues were derived from simply marking up receivables on products that had not been sold. We suspect that such questionable accounting could explain why Li-Cycle’s CFO and auditor resigned in January 2022, mere months after the Company went public.