Loop Industries (NASDAQ:LOOP) stock lost almost 40% after market saw that the company is the target of a short report from Hindenburg Research. The firm claims that “Loop’s management has a track record of taking investors on a ride with sweet sounding public company stories that have ended in catastrophic losses.”
Here are some key points from report:
- According to Hindenburg Research Loop Industries has never generated revenue.Their research indicates that Loop is smoke and mirrors show with no viable technology.
- As part of our investigation, they “interviewed former employees, competitors, industry experts, and company partners”. Hindenburg claims that they also reviewed extensive company documentation and litigation records.
- Former employees revealed that Loop operated two labs: one reserved for the company’s two twenty-something lead scientist brothers and their father, where incredible results were achieved, and a separate lab where rank-and-file employees were unable to replicate the supposedly breakthrough results.
- The two brothers who act as lead scientists for Loop and who co-invented Loop’s recycling process appear to have no post-graduate education in chemistry and list no work experience other than Loop.
- A former Loop employee told Hindenburg that Loop’s scientists, under pressure from CEO Daniel Solomita, were tacitly encouraged to lie about the results of the company’s process internally. They have obtained internal documents and photographs to support their claims.
- Loop focuses on recycling a common form of plastic called “PET”. According to a former employee, Loop’s previous claims of breaking PET down to its base chemicals at a recovery rate of 100% were “technically and industrially impossible”. The same employee told us the company’s claims of producing “industrial grade purity” base chemicals from PET were false.
- According to litigation records, Loop’s CEO, Daniel Solomita hired a convict, who had previously pled guilty to stock manipulation, to help raise Loop’s startup capital. That convict introduced Solomita to another convict who facilitated Loop’s first investment.
- Solomita has no apparent formal science education but has a history of stock promotion at another publicly traded company that subsequently imploded.
- Executives from a division of key partner Thyssenkrupp, who Loop entered into a “global alliance agreement” with in December 2018, told them their partnership is on “indefinite” hold and that Loop “underestimated” both costs and complexities of its process.
- Hindenburg contacted Loop’s other partners, including Coca-Cola and PepsiCo, most of whom refused to divulge whether any plastic had been recycled as part of their partnerships with Loop. Comments from Danone, owner of the Evian brand, suggested it had not bought any PET from Loop thus far.
- Loop’s JV with PET and chemical company Indorama, promoted frequently over the last two years as an imminent revenue stream, is “still being finalized”, according to an employee, despite being announced in 2018. An Indorama employee told us no production has taken place thus far.