Li-Cycle’s Last Stand: A Speculative Bet on Lithium-Ion Recycling Unravels

Li-Cycle $LICYF hit the snooze button again, but this short extension—pushed to May 13, 2025, per the latest waiver from Glencore and Wood River—shows they’re most likely scrambling to sort out liability shields like insurance or legal protections and intangible assets such as patents or proprietary recycling tech. They seem to have a strategy to sell assets and/or consolidate operations that looks beneficial to Glencore and Wood River, or they wouldn’t have given them the extension.

Glencore, now holding a 66.7% stake after converting their notes from 2023, has no choice but to let Li-Cycle hunt for buyers for its assets, especially with the stock trading at rock-bottom levels—barely above $0.07 a share.

What Could Happen Next

Li-Cycle, with Hilco Corporate Finance, finalizes a shortlist of potential buyers for the Alabama and Arizona Spokes, aiming to sign letters of intent. The New York and German Spokes keep running to generate cash.

If sales close, Glencore applies proceeds to offset part of their $200 million+ debt exposure, avoiding a total write-off. If no buyers step up, Li-Cycle may suspend remaining operations, potentially triggering a bankruptcy filing.

The Alabama and Arizona Spokes have equipment and infrastructure for lithium-ion battery recycling, which might attract automakers or cell manufacturers. Still, I expect smaller startups to be the main bidders, possibly a company with a black mass processing platform compatible with Li-Cycle’s mechanical black mass production platform. There is always the possibility of a larger cradle-to-gate recycler, like Cirba Solutions, whose entire corporate strategy is expansion through mergers and acquisitions.

The reason I think this is that there is no real black mass market in the United States, with most of it being shipped to countries like Korea for processing due to the lack of domestic battery-grade facilities. Moreover, I think the actual sale price could be much lower than expected because Li-Cycle’s process appears to produce only low-quality black mass. The ability to recover and separate low-value materials, like the current collectors, is either non-functional or too costly to be practical. The main value may lie in the property and structures, with the equipment selling well below its current depreciated value. This is where a strictly black mass processor like Green Li-ion could benefit greatly from Li-Cycle’s yard sale.

If an automaker or cell manufacturer is interested, they may pursue a 100% offtake agreement for black mass from a spoke, providing enough capital to maintain limited operations. This would also require storing the black mass for later conversion to battery grade. Although around 10 lithium-ion cell facilities are expected to come online in the next year or so, they likely won’t have black mass processing capabilities at launch. However, one of the main factors for profitability and sustainability is a loss prevention platform that recycles production scrap. It wouldn’t take much modification to allow such a platform to process low-quality black mass alongside Q&A rejects from the finishing lines.

There are also intangible assets like the patents, which, if Glencore is smart, they will make sure to acquire themselves. I just wrote about another company that operates in the cell manufacturing sector of the industry but is, in reality, nothing more than a patent holding company. By the way, that stock started trading this morning after a reverse split and is down 20%. I honestly expect it to drop further before a bounce, followed by a retrace and sideways trading for some time. But anyway, back to Li-Cycle—while the value of the tangible assets may be highly depreciated, the patents may be where the main value for Glencore resides.

Since Glencore owns a majority of Li-Cycle and controls the board, they can direct the millions in sale proceeds from the assets to themselves as a majority shareholder, either through a dividend or direct repayment of their debt exposure—if sales occur pre-bankruptcy. In bankruptcy, they’d recover as a secured creditor. Whatever deal is being worked out, Glencore will be the main beneficiary.

If the Asset Sales Fall Through

If no buyers step forward, Li-Cycle will suspend all operations, including those at the New York and German Spokes, in an effort to preserve cash. The board, led by Glencore, will then meet with their Licensed Insolvency Trustee (LIT) to prepare for a bankruptcy filing under the Companies’ Creditors Arrangement Act (CCAA).

The CCAA filing would stop creditor actions like lawsuits and debt collection. A court-appointed monitor would oversee the process, while Li-Cycle works on a restructuring plan. This could include selling the Alabama and Arizona Spokes, and if it turns out that selling the New York and German Spokes proves more profitable than continuing operations, those, too, could be sold through a court-supervised auction.

The monitor will work to sell the remaining assets, aiming to close deals quickly. If no viable restructuring plan emerges, the court may shift the case to a Bankruptcy and Insolvency Act (BIA) liquidation, dissolving Li-Cycle and distributing proceeds to creditors, with Glencore and secured creditors like Wood River prioritized over unsecured ones.

If liquidation proceeds, the Licensed Insolvency Trustee (LIT) will finalize asset sales and creditor payouts. Shareholders will likely see little to no return, as Li-Cycle’s millions in liabilities dwarf its cash on hand and remaining asset value.

Li-Cycle is poised to become a textbook cautionary tale about the risks of investing in speculative companies within an overhyped industry. Investors, lured by China’s lithium-ion boom and media hype of Americans owning two electric vehicles and a picket fence, chased the next Tesla. Many firms—from EV makers to lithium-ion recyclers—banked on this flawed narrative. In fact, a friend of mine summed it up this morning:

“Missed 5 years of getting like 50% a year because of…”

DISCLAIMER: This article should not be construed as an offering of investment advice, nor should any statements (by the author or by other persons and/or entities that the author has included) in this article be taken as investment advice or recommendations of any investment strategy. The information in this article is for educational purposes only. The author did not receive compensation from any of the companies mentioned to be included in the article.