Translation: Original published in Finnish on 3/3/2025 at 8:33 am EET.

We lower our recommendation for Spinnova to Reduce (was Accumulate) and our target price for the company to EUR 0.45 (was EUR 1.10). Suzano's decision to pull out of the planned investments in Spinnova's fiber production technology was a major disappointment and redefined the company's strategy and investment story all at once in a way that makes building a winning recipe from existing ingredients far from easy. Due to the significant uncertainty about the company's future direction, the share can no longer be recommended as an investment, even though the company's enterprise value fell to negative after Friday's share price crash.  

Suzano pulls out of technology investments

Spinnova announced on Friday that Suzano has decided to withdraw its planned investment in Spinnova's fiber production facilities. We commented on the news here on Friday. The decision is dramatic for Spinnova, as Suzano, which relies on wood pulp, the raw material furthest along the development path in our forecasts, and which has a strong investment muscle, was by far Spinnova's largest customer over the entire forecast horizon, with a cumulative revenue share of more than 50%. It is a small consolation that Suzano's virtually exclusive position as a user of applications for wood-based raw materials is likely to expire. 

Options are far from clear

We estimate that Spinnova could seek to develop its own MFC processing capability, find new partners to develop fiber production focused on wood pulp-based material, and continue development work focused on other raw materials as currently planned. However, the key challenge in our view would be to find willing and able players to invest up to hundreds of millions of euros in manufacturing. In our assessment, the company does not have the financial means to engage in the production business itself. Spinnova still had a net cash position of 41 MEUR at the end of 2024 and the company's enterprise value with the current net cash position is clearly negative. Therefore, we believe that the sale of the IPR, which contains intrinsic value, would be the option with the positive expected value and the lowest risk in the short term. While we believe that Spinnova must even consider pursuing this very radical solution (or at least explore its feasibility), we think that the company will still seek other options.

Forecasts have been reworked

We have removed all Suzano projects from our Spinnova forecasts and only included other pulp-related revenue streams in the company's forecasts from the mid-2030s. In addition, we have written down the Woodspin stake (19.4 MEUR at the end of 2024) on a non-cash basis. Based on our current projections, Spinnova will not reach positive cash flow in this decade (previously positive cash flow in 2029). Therefore, according to our projections, the company will need additional financing by the turn of the decade at the latest. Our forecasts are subject to considerable uncertainty and could change significantly depending on the content of the strategy update.

Situation is too uncertain

The current negative valuation of Spinnova is not something to get excited about, though, as the cash burn is likely to continue for years, assuming the company continues its technology commercialization efforts. At the same time, outlining the upside of the good scenario is a shot in the dark due to the change in strategy, while the probability of the weakest scenario (i.e. failure to commercialize on its own) has increased. Therefore, despite the negative enterprise value, we do not recommend the stock for investment purposes until the situation becomes clearer. Thus, we are now quickly withdrawing our badly mistaken recommendations, which we knew to be risky from the start.