Louis Camhi presents an ORIGINal investment thesis $ORGN

Episode Summary

Executive Summary: The episode is a deep dive into Origin Materials (ORGN), a de-SPAC carbon-negative PET materials company. Lewis Cammy argues it offers asymmetric upside if it can prove Origin One works on time and on budget, while host Andrew Walker presses on execution, financing, backlog credibility, and SPAC skepticism. The discussion centers on demand, carbon credits, patents, construction risk, and whether the stock is a high-risk VC-style bet or a value trap.

Main Topics: Origin Materials’ carbon-negative PET thesis (Priority: 5/5): Lewis frames Origin as a direct beneficiary of ESG and carbon-neutrality trends, producing chemically identical PET from wood-based feedstocks at competitive cost, enabling customers to switch without retooling. Construction and execution risk (Priority: 5/5): The biggest risk discussed is whether Origin One and Origin Two can be built on time, on budget, and at scale. Both speakers agree the project is essentially a construction execution test, with Origin One as the key catalyst. Backlog, offtake agreements, and demand validation (Priority: 4/5): They discuss the reported backlog growth and the distinction between binding offtake contracts and softer capacity reservations. Lewis argues demand is real because large strategic customers want carbon-neutral inputs. SPAC sponsorship, diligence, and credibility (Priority: 4/5): The episode spends significant time on why Artius sponsors Charles Drucker and Boone Sim are considered top-tier due to M&A, payments, and diligence experience, which supports confidence in the deal process. Financing structure and project finance risk (Priority: 4/5): The conversation examines how redemptions, project financing, Apollo’s backstop, and future funding for Origin Two affect the investment case. Lewis says financing is plausible now but remains exposed to market shocks until committed. Valuation and asymmetric return potential (Priority: 4/5): Lewis frames ORGN as a venture-like investment: if successful, it could be worth multiples of current price; if it fails, it could go to zero. The host challenges whether waiting for de-risking is smarter. Broader SPAC market skepticism and comparables (Priority: 3/5): The hosts contrast Origin with other de-SPACs and discuss how weak market sentiment, poor guidance reactions, and failed SPACs have made investors wary of even high-quality names.

Key Arguments: Origin is a carbon-negative PET producer positioned directly on the ESG/carbon-neutrality trend, which Lewis believes is a durable and powerful demand driver. The company’s PET is chemically identical to petroleum-based PET, so customers like Pepsi can use it without retooling existing equipment. Origin’s main business risk is execution, not demand; if Origin One works, the thesis de-risks materially and the business can scale like a repeatable manufacturing platform. Top-tier sponsors Charles Drucker and Boone Sim add credibility because of their M&A diligence backgrounds and ability to evaluate complex deals. Backlog growth from $1.9 billion to $3.5 billion suggests demand momentum, though the most credible commitments are binding offtake agreements rather than mere reservations. Project financing is not fully locked until closer to construction, so macro shocks remain a real risk even if the current capital structure appears workable. Apollo’s backstop was a bullish signal because it provided capital at only a small discount and suggested sophisticated investors saw value in the story. The stock should be viewed as a binary, VC-style bet rather than a normal public equity, with potentially very large upside or total loss. Construction risk is partially mitigated by Coca-Cola’s modular build expertise and performance guarantees on Origin One. Even if pricing is not at a premium, the model can work if Origin can sell at cost parity and capture carbon-credit economics. The current market is overly punitive toward many de-SPACs, so even good execution may not immediately translate into stock appreciation.

Data Points: SPAC size: $750 million - Artius, the SPAC that merged with Origin, was described as one of the larger SPACs raised. PIPE investment: $200 million - Additional private investment in the public equity alongside the SPAC. Origin One capex: $70 million - Lewis cited the estimated cost of the first scale plant in Sarnia, Ontario. Origin Two capex: Just under $1.1 billion - Projected cost of the second, much larger facility. Backlog at deal announcement: $1.0 billion - The backlog level when the merger was announced in February. Backlog at investor day: $1.9 billion - Updated backlog figure given in the May investor presentation. Backlog in Q2: $3.5 billion - Reported backlog growth by the time of the Q2 update. Customer contract size: $100 million+ - Lewis said the offtake agreements are large enough to require board-level approval. Origin One timing: End of 2022 - Expected online date for the first scale plant after delays. Origin Two timing: Site selection by end of year; construction in Q1 2023; online in 2025; full-year revenue in 2026 - Projected development timeline discussed for the second facility. Potential margin: 60% EBITDA margin at scale - Management’s long-term margin target discussed in the context of cheap feedstock and high value-added output. Oil price sensitivity: Cost-competitive around $20 oil - Lewis said the company could remain competitive even in lower oil price environments. Apollo backstop: $30 million - Apollo provided capital to help bridge the deal after redemptions. Apollo fee: 3% - Fee charged by Apollo for the backstop capital. Apollo entry price: About $9.70/share - Calculated from the 3% fee structure relative to the trust value. Insider buying: About $7.5 million by Charles Drucker; about $0.5 million by Boone Sim and Rich Riley - Open market purchases were cited as a sign of confidence. Project finance leverage: 70%–75% debt - Lewis described the expected financing mix as reasonable for project finance. Alternative project finance example: 80% debt-to-equity - He referenced PCT’s disclosed financing structure as a comparator. Market comparison: 39 of 61 SPACs (64%) traded down - Lewis cited this as evidence of poor post-close SPAC market performance. Relative market performance: Russell up about 12%; SPACs underperformed by 3,600 bps - He contrasted broader small-cap performance with SPAC underperformance.

Pivotal Quotes: "You have this, we believe it. Everyone wants to go carbon neutral and carbon neutral at the same price." — Lewis Cammy: Summarizing why Origin’s ESG and economics combination is compelling. "The biggest risk here is construction, whether it's on the pricing or execution or just the whole thing." — Lewis Cammy: Identifying the central investment risk despite confidence in demand. "The notion that I'd rather trade this to have less downside and less upside—that's not wrong." — Andrew Walker: Discussing the choice between buying now as a high-risk bet versus waiting for de-risking.

Implications: Origin is presented as a high-conviction but highly speculative de-SPAC: if execution and financing hold, it could re-rate sharply; if not, it could fail outright. For the sector, the episode shows investors may still back quality sponsors and real technology, but only when backed by tangible proof points.