I hope they can solve the plastic issue, would be great for the world.
However:
"very ambitous company", "claim to have a solution for plastic recycling", "Potentially thousands of dollars", "as a pre-revenue company, they raise money when they need more.", "there will be more dilution, but if the company succeeds this will not mean much.", "has proven its technology already on a smaller scale.", "But if it works", "almost too good to be true", "Imagine the revenue", "If a single one of these goes to the next stage", "a potential massive run ", "If they can prove their technology works at scale "
A lot of ifs potential's, imagination, etc etc. It sounds very much like a speculative biotech bet. 1000x or 0. If the product doesn't work, insider ownership 43% or 4.3% wouldn't matter. I was also impressed when I first ready about this in a previous write-up here https://www.greeninvesting.eco/p/aduro-clean-technologies
But there are a couple issues.
1) The basics of thermodynamics of the chemical reaction dictates that oil->plastic will always be cheaper than plastic->oil. Making new plastic takes less energy than recycling. Therefore, Unless there is a forced tax or regulations of some sort, it will probably never be economically viable.
2) I read somewhere that all reactors face the same issue; reactors clog with toxic tar made up of the dirt made up of the dirt that comes with the plastic and and the chemicals added to the process.
Unless you can disprove these points, this feels like a hyped up speculative bet. But obviously if it works, investors will be massively rewarded. Even if it's not economically viable, investors may still be rewarded if big players decide that a small percentage of their FCF will go towards recycling of plastics with Aduro's tech to boost marketing by claiming they are carbon neutral or whatever.
"Imagine the revenue and net income multiple" I meant multiple on revenue which would be extremely high. A bit badly worded. "Thousands on dollars" was obviosly tongue and cheek. It would be worth billions if it's proven to work like they claim
But when it comes to your issues 1) and 2) . I have read many arguments back and forth like this and I don't have the knowledge to really evaluate them.
It all comes down to risk/reward. We have the reward which is potentially huge could be 10-100x and then risk. All these points high insider ownership, succesfull in a smaller scale, massive yield, huge companies working with them, low market cap compared to peers, prudent management, patents. These different things decrease the likelihood of absolute failure and increases the likehood of them succeeding.
Then I position size accordingly, because it is still pre-revenue company with still mostly potential. I didn't put a lot into this. Now it has moved up so it has become a decent size position, but I didn't risk a lot.
Agree with the r/r approach. However, just be careful to balance both. If the risk is larger than the reward, u still don't get an attractive profile. Even with reward 1000x, doesn't matter if risk is 100000000000000. Point 1) and 2) are very risk IMO, hence why I am being cautious here:) Anyways, 1-3% allocation may not hurt so much if one wants to bet on this. Good luck
I hope they can solve the plastic issue, would be great for the world.
However:
"very ambitous company", "claim to have a solution for plastic recycling", "Potentially thousands of dollars", "as a pre-revenue company, they raise money when they need more.", "there will be more dilution, but if the company succeeds this will not mean much.", "has proven its technology already on a smaller scale.", "But if it works", "almost too good to be true", "Imagine the revenue", "If a single one of these goes to the next stage", "a potential massive run ", "If they can prove their technology works at scale "
A lot of ifs potential's, imagination, etc etc. It sounds very much like a speculative biotech bet. 1000x or 0. If the product doesn't work, insider ownership 43% or 4.3% wouldn't matter. I was also impressed when I first ready about this in a previous write-up here https://www.greeninvesting.eco/p/aduro-clean-technologies
But there are a couple issues.
1) The basics of thermodynamics of the chemical reaction dictates that oil->plastic will always be cheaper than plastic->oil. Making new plastic takes less energy than recycling. Therefore, Unless there is a forced tax or regulations of some sort, it will probably never be economically viable.
2) I read somewhere that all reactors face the same issue; reactors clog with toxic tar made up of the dirt made up of the dirt that comes with the plastic and and the chemicals added to the process.
Unless you can disprove these points, this feels like a hyped up speculative bet. But obviously if it works, investors will be massively rewarded. Even if it's not economically viable, investors may still be rewarded if big players decide that a small percentage of their FCF will go towards recycling of plastics with Aduro's tech to boost marketing by claiming they are carbon neutral or whatever.
Cheers!
"Imagine the revenue and net income multiple" I meant multiple on revenue which would be extremely high. A bit badly worded. "Thousands on dollars" was obviosly tongue and cheek. It would be worth billions if it's proven to work like they claim
But when it comes to your issues 1) and 2) . I have read many arguments back and forth like this and I don't have the knowledge to really evaluate them.
It all comes down to risk/reward. We have the reward which is potentially huge could be 10-100x and then risk. All these points high insider ownership, succesfull in a smaller scale, massive yield, huge companies working with them, low market cap compared to peers, prudent management, patents. These different things decrease the likelihood of absolute failure and increases the likehood of them succeeding.
Then I position size accordingly, because it is still pre-revenue company with still mostly potential. I didn't put a lot into this. Now it has moved up so it has become a decent size position, but I didn't risk a lot.
This is my approach.
Agree with the r/r approach. However, just be careful to balance both. If the risk is larger than the reward, u still don't get an attractive profile. Even with reward 1000x, doesn't matter if risk is 100000000000000. Point 1) and 2) are very risk IMO, hence why I am being cautious here:) Anyways, 1-3% allocation may not hurt so much if one wants to bet on this. Good luck
Could you please provide the source for issue 2) ? That would be much appreciated.