Polypropylene recycler PureCycle Technologies LLC disclosed Nov. 10 that CEO Mike Otworth is facing a Securities and Exchange Commission investigation over statements about the company's technology, financial projections and other business plans.
The Orlando, Fla.-based firm, which has aggressive growth plans and uses a novel solvent-based recycling technology licensed from Procter & Gamble Co., said in a stock filing that the SEC issued an investigative subpoena to Otworth around Sept. 30.
"The investigation pertains to, among other things, statements made in connection with PCT's technology, financial projections, key supply agreements, and management," according to the company, which trades under the symbol PCT.
It said the company and Otworth "intend to cooperate with the SEC's subpoena and investigation" and it said the subpoena requests testimony "in connection with a non-public, fact-finding investigation."
On a Nov. 11 earnings call, company officials did not provide more details on the SEC investigation, including the timing of the review or details of the subpoena.
"It is important to note that the fact-finding nature of the investigation does not infer any conclusions that any violations have occurred," said Chief Financial Officer Michael Dee.
In May, the company faced a report from investment firm Hindenburg Research, which said its investigation questioned PureCycle's financial projections and technology.
Hindenburg, which said it holds a short position with PureCycle stock and will benefit financially if the share price drops, also said its investigation questioned the special purpose acquisition company vehicle, or SPAC, the firm used to go public.
In its report, Hindenburg pointed to what it said were bankruptcies, delistings and sharp stock value declines among previous listed companies that PureCycle executives were involved with.
The company's stock price was down about 15 percent in mid-day trading Nov. 11, to about $9.70 a share. When it went public in March, it had initially traded at $32.69, but has not regained that price since.
In its SEC filing, the company said it is also been the subject of several shareholder lawsuits filed between May and November.
The company said in its filing that it does not believe the shareholder lawsuits will materially damage its finances or operations, and it has said the Hindenburg report was primarily aimed at benefiting the short-selling firm economically.
In its quarterly financial results Nov. 10, the company reported a loss of $20.9 million in the quarter ending Sept. 30, as it continues its planned build out.
The company said its first commercial scale facility, in Ironton, Ohio, is expected to be operating by the end of 2022 with a capacity of 107 million pounds, and it said work at its first larger, cluster-scale manufacturing site in Augusta, Ga., with a potential capacity of 650 million pounds, is expected to start in the first quarter.
The company pointed to new supply agreements totally 168 million pounds of waste PP feedstock and said it has raised $494 million in cash and investments to fund operations.
"PureCycle remains on schedule to achieve our strategic milestones," Otworth said.
He said P&G and other corporate partners the company has have done extensive due diligence on PureCycle's technology but he said the company does face challenges scaling up.
"We have a very big scaling and execution challenge, there's no question about that," Otworth said.
Dee pointed to PureCycle's ability to recruit people with strong industry experience, noting the company had recently hired a senior financial executive from LyondellBasell Industries NV, Lawrence Somma, to be the company's new CFO.
The company said it recently launched its first product with its recycled resin, a shampoo dispenser with Procter & Gamble. As well, it said it opened its first satellite pre-processing facility for PP in Florida and struck an agreement to be a recycling partner with the Cleveland Browns professional football team.