Velan Inc.: A Stock on Fire or a Smoldering Risk?

Investors, Velan Inc. (TSX: VLN) is cooking up a storm! After soaring 13% last week and tripling its value over five years, this industrial powerhouse is in the spotlight—thanks to a major clean energy contract and some strategic divestitures. But before you dive in, let’s dissect the risks and rewards.

The Divestiture Deal: A Fresh Start or a Gamble?

Velan’s recent moves to offload non-core assets are nothing short of bold. In January, it sold its asbestos liabilities to Global Risk Capital for $143 million, finally burying a decades-old albatross. Then, it unloaded its French subsidiaries to Framatome SAS for a cool $208.5 million. These deals aren’t just about cash—they’re about focus. With those liabilities and distractions gone, Velan can pour resources into its core business: power generation components, including nuclear and clean energy projects.

But here’s the catch: divesting isn’t free. While the cash influx is a win, investors need to see how Velan will use it. Will it reinvest in growth? Pay down debt? Or reward shareholders? We’ll get clues on May 21 when Q4 earnings drop.

The SMR Contract: A Game-Changer?

Let’s talk about the Main Services Agreement with GE Hitachi Nuclear Energy for Canada’s first Small Modular Reactor (SMR). This isn’t just a contract—it’s a moonshot. SMRs are the future of clean energy, and Velan’s role in this project could be a springboard for long-term growth. The company has already shown it can secure big-ticket deals, but execution is key. Miss a deadline, and that 262% five-year stock gain could evaporate.

The Red Flags: Labor Strikes and Operational Hurdles

Now, let’s hit the brakes. Velan’s Vermont plant faced a labor strike in October 2024, disrupting operations. While the strike ended, it’s a reminder that union relations and supply chain reliability are critical. A company this leveraged on big contracts can’t afford more disruptions.

Plus, Velan’s Q3 results—released in November 2024—showed improved profitability, but that’s after the divestitures. We need to see if its core business can sustain growth without selling assets. The upcoming earnings call on May 22 will be a litmus test.

What’s Next?

Investors, mark your calendars: May 21 is earnings day, and May 22’s analyst call is your front-row seat to Velan’s strategy. Look for:
- Backlog execution: How many SMR contracts are in the pipeline?
- Margin improvements: Is the core business profitable without divestitures?
- Debt management: What’s the plan for the $143M+ windfall?

The Bottom Line: Buy, Sell, or Hold?

Velan is a high-risk, high-reward play. Its stock has been a rocket ship (262% in five years!), but it’s not for the faint-hearted. If you’re all-in on clean energy and trust management’s execution, buy now—but set a stop-loss. If operational hiccups persist, this stock could crater.

Final Verdict: Velan is a “Bullish with a Bullet” pick. The SMR deal and divestitures are major positives, but labor and execution risks linger. Own it, but keep an eye on May’s updates. If margins and backlog grow, this stock could keep climbing—otherwise, it’s a trap.

Stay hungry, stay foolish… but stay diversified!

Note: Past performance ≠ future results. Consult your financial advisor before making any trades.