Trading of shares in IperionX Ltd (ASX: IPX), a titanium and critical minerals company, has been temporarily halted following a short attack by a US investment firm.
Spruce Point Management released a report leveling several allegations against IperionX, suggesting that the company has exaggerated its ambitions to become part of an onshore US titanium production industry.
The report stated:
After a forensic analysis of IperionX Ltd and its ambition to become a vertically integrated producer of titanium powders and products, we believe that investor expectations are overly optimistic, and the company faces substantial challenges in its commercial efforts which may not be fully reflected in its valuation. We also have concerns regarding the accuracy of its financial reporting.
Spruce praised the company's effort to "reshore the US titanium supply chain with a more cost-effective and environmentally friendly production process," acknowledging its competent management team.
However, we are skeptical about the attractiveness of its target markets and doubt that the heavily promoted HAMR process will 'revolutionize' the industry or replace the widely established Kroll process. Therefore, we question IperionX's economic rationale for expanding capacity given its limited customer contracts and lack of historical revenue.
Spruce calculated that IperionX shares are currently overvalued, suggesting a potential price reduction of 70% to 95%.
IperionX requested the trading halt on Thursday to prepare a response to the Spruce report, and the halt is anticipated to remain until as late as Monday morning.
Over the past year, IperionX shares have more than doubled, trading at $5.61 at the close on Wednesday, still below the 12-month high of $9.20.
Production Outlook Remains Positive
In its recent quarterly update, the company reported it is scaling titanium capacity to 1,400 tonnes annually, aiming for commissioning by mid-2027, which would position IperionX as America's largest and lowest-cost titanium powder producer.
The company announced it has the capability to produce a diverse range of titanium products, with all major manufacturing equipment now operational for titanium powder and component manufacturing at its Virginia campus.
At the end of the last quarter, the company reported having US$79.2 million in cash.
Besides Australian listing, IperionX is also traded on the Nasdaq exchange in the US. The Australian-listed shares have a market value of $1.88 billion.
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