Undervaluation and Governance Shifts at REC Silicon: A Strategic Buy Opportunity?

The corporate governance landscape at REC Silicon (RECSI.OL) has undergone a seismic shift in 2025, with minority shareholders challenging Hanwha’s dominance and reshaping the board to prioritize transparency and shareholder value [1]. This upheaval, coupled with the company’s undervalued silicon assets in a rapidly expanding market, raises a compelling question: Is REC Silicon a strategic buy opportunity for investors willing to navigate its governance complexities?

Governance Reforms and Shareholder Dynamics

The new board, led by independent directors such as Jens Ulltveit-Moe and Karina Fossmark, has launched an investigation into Hanwha’s alleged operational interference, including the controversial closure of the Moses Lake facility and termination of a supply agreement with Hanwha Qcells [1]. These actions have sparked legal scrutiny in both U.S. and Norwegian courts, with Water Street Capital filing for expedited discovery to address Hanwha’s transparency lapses [1]. The Norwegian Takeover Authority’s upcoming ruling on the validity of the Transaction Agreement (TA)—which restricts the board from seeking higher bids—could be a pivotal moment. A favorable outcome might unlock a revaluation of REC’s silane gas and polysilicon assets, which are critical to the silicon anode battery market [1].

Hanwha, as the majority shareholder, has warned that these governance changes could jeopardize its financial support for REC Silicon, citing liquidity concerns [3]. However, the new board, backed by a 26% minority shareholder coalition, is pursuing partnerships with innovators like Sila Nanotechnologies and Group14 Technologies to leverage REC’s silicon anode and semiconductor-grade materials [1]. This strategic pivot underscores a shift from Hanwha’s operational control to a value-driven approach focused on stakeholder collaboration.

Financial Metrics and Market Position

Despite Q2 2025’s positive EBITDA of $4.9 million—a stark contrast to the $4.6 million loss in Q1—the company’s financials remain precarious. Its Enterprise Value (EV) of $138.63 million as of August 2025 reflects a 58.64% decline from historical averages, while its EV/EBITDA ratio of 19.95x and P/S ratio of 0.9x suggest undervaluation relative to industry peers [4]. These metrics highlight a disconnect between REC’s operational improvements and its market capitalization, particularly given the silicon anode battery market’s projected 50.14% CAGR through 2034 [2].

REC’s core assets—silane gas and electronics-grade polysilicon—are uniquely positioned to benefit from this growth. Silane gas, a precursor for silicon anodes, is essential for high-energy-density batteries in EVs and consumer electronics [5]. Meanwhile, the Butte plant’s polysilicon output aligns with semiconductor demand, further diversifying revenue streams [2]. Yet, Hanwha’s alleged operational interference and the Moses Lake closure have obscured these strategic advantages, creating a valuation gap.

Valuation Discrepancy and Market Potential

The silicon anode battery market, valued at $536.53 million in 2025, is forecasted to reach $20.8 billion by 2034 [2]. REC’s silane gas production could capture a significant share of this growth, especially as governments incentivize domestic supply chains through initiatives like the U.S. Inflation Reduction Act and EU Green Deal [5]. However, Hanwha’s takeover offer of NOK2.20 per share—currently trading at NOK2.19—appears to undervalue the company’s long-term potential [1].

A critical data point to consider is the EV/EBITDA ratio of industry peers. While REC’s 19.95x ratio seems high, its P/S ratio of 0.9x is far below the European Semiconductor industry average of 2.2x [4]. This discrepancy suggests that, despite short-term financial challenges, the market may be underestimating REC’s revenue-generating capacity in a high-growth sector.

Risks and Opportunities

The path forward is fraught with risks. Hanwha’s potential withdrawal of financial support could exacerbate liquidity issues, while legal battles over the TA may delay strategic repositioning. Additionally, the Moses Lake facility’s suspension and trade uncertainties in the semi-memory market pose operational headwinds [1].

Conversely, a successful governance transition could unlock substantial upside. If the Norwegian Takeover Authority invalidates the TA, the board might pursue alternative financing or higher bids for REC’s assets. The company’s exploration of silicon anode partnerships and cost-reduction initiatives also positions it to capitalize on the $3.6 billion battery market by 2030 [5].

Conclusion

REC Silicon’s undervaluation and governance shifts present a high-risk, high-reward scenario. While Hanwha’s influence and financial constraints pose immediate challenges, the company’s silicon assets are embedded in a market with exponential growth potential. For investors with a long-term horizon, the combination of governance reforms, legal clarity, and sector tailwinds could transform REC Silicon from a troubled entity into a strategic player in the silicon anode revolution.

Source:
[1] REC Silicon's Board Shake-Up: Strategic Implications for ... [https://www.ainvest.com/news/rec-silicon-board-shake-strategic-implications-shareholder-takeover-dynamics-2508/]
[2] Silicon Anode Battery Market Size and Forecast 2025 to 2034 [https://www.precedenceresearch.com/silicon-anode-battery-market]
[3] Letter from Hanwha to shareholders in REC Silicon ASA [https://live.euronext.com/en/products/equities/company-news/2025-06-23-rec-silicon-letter-hanwha-shareholders-rec-silicon-asa]
[4] ev/ebitda - REC Silicon ASA (RECSI.OL) [https://valueinvesting.io/RECSI.OL/valuation/ev_ebitda-multiples]
[5] Silicon Anode Battery Technologies and Markets 2025-2035 [https://www.idtechex.com/en/research-report/silicon-anode-batteries-2025/1052]