Enviva plunges after Blue Orca short report dubs 'latest ESG farce' (update)

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Update 8:10pm: Adds Enviva response to short report.

Enviva (NYSE:EVA) -12% in Wednesday's trading following a negative report from Blue Orca Capital, which said it is short the stock because "EBITDA is inflated, it will cut its dividend, and newly discovered data suggests... the company is flagrantly greenwashing its wood procurement."

Enviva's (EVA) claims to be a pure-play ESG company is "nonsense on all counts," according to Blue Orca, "a product of deranged European climate subsidies which incentivize the destruction of American forests so that European power companies can check a bureaucratic box."

The company is "a dangerously levered serial capital raiser whose deteriorating cash conversion and unprofitability will drain it of cash next year," Blue Orca said.

Enviva (EVA) responded in a press release late on Wednesday to the short report.

"The report contains numerous errors, repeats previous unsupported speculation and gross mischaracterizations, and draws specious, misleading conclusions," Enviva said in the statement.

Raymond James analyst Pavel Molchanov said in a note on Wednesday that that the ecological claims in the short report are "old news" and the financial allegations are "erroneous."

"Blue Orca predicts a dividend cut, we see no objective, rationale basis for such a conclusion," Molchanov, who has an outperform rating and $80 price target on EVA, wrote in the note.

Enviva (EVA) short interest is 12%.

Enviva (EVA) "faces two critical upcoming tests" - centering around its cash conversion rate during H2 2022, and its ability to continue accessing external capital from debt markets as its bond prices sell off similar to the panic of 2020 - Daniel Thurecht writes in an analysis published on Seeking Alpha.

--With reporting by Josh Fineman