Toronto-based Li-Cycle (LICYF, Financials) filed for bankruptcy protection in Canada and the U.S., triggering a 30% drop in its shares on Wednesday. Glencore (GLNCY, Financials), its top creditor, rose 1.4% after submitting a $40 million credit bid to acquire its assets.

Warning! GuruFocus has detected 4 Warning Signs with LICYF.

Li-Cycle filed for creditor protection under the Companies' Creditors Arrangement Act in Canada and initiated Chapter 15 proceedings in the U.S. Bankruptcy Court for the Southern District of New York. The company said the protection will help facilitate either a restructuring or an orderly sale of its business or assets.

Glencore stepped in with a $10.5 million debtor-in-possession loan and a $40 million stalking horse credit bid. The offer positions Glencore to acquire Li-Cycle's assets unless a higher bid emerges during the sale process.

The company had been seeking buyers since March as it ran short on funding. Cost overruns and technical setbacks had persisted despite a $475 million loan from the U.S. Department of Energy finalized in November 2024.

Li-Cycle's collapse raises concerns about the viability of early-stage battery recyclers navigating scale-up challenges, even with government support.

Investors will be watching for court decisions and whether other bidders emerge for Li-Cycle's assets, as Glencore tightens its grip on the battery materials supply chain.

This article first appeared on GuruFocus.

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