This content is from: Portfolio

The Short Seller Who Bet Against Nikola Has a New Target

Nathan Anderson’s Hindenburg Research alleges that sustainable plastic company Loop Industries is “smoke and mirrors”.

Short seller Hindenburg Research — fresh off a winning short bet against electric truck maker Nikola — has struck again, calling sustainable plastic manufacturing company Loop Industries “smoke and mirrors with no viable technology” and alleging that it has never made money.

Hindenburg has taken a short position against Montreal-based Loop.

The research firm alleged in a report posted on its website on Tuesday that former Loop employees it interviewed claimed Loop operated two separate 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.”

Institutional Investor has not independently verified each of the claims in Hindenburg’s report, but a former employee who spoke on the condition of anonymity said the report is accurate.

In a statement issued after this story was initially published, Loop said Hindenburg’s report contained “factual inaccuracies.”

“Hindenburg Research has not engaged with Loop directly nor does Loop Industries believe Hindenburg Research has done the required due diligence for this report,” the company added in the statement. “The claims it makes are either unfounded, incorrect, or based on the first iteration of Loop's technology, known as Gen 1, which was in use between 2014 and 2017. In 2017, Loop reinvented its process and developed its Gen 2 technology, which is at the core of Loop's commercialization projects.”

Hindenburg said it spent six months investigating the company, interviewing competitors, industry experts, and company partners and reviewing extensive documentation and litigation records. Hindenburg said it has also shared its findings with regulators.

Shares of Loop plunged nearly 35 percent in early market trading. 

[II Deep Dive: Citron Research Joins Nikola Attack]

On its website, Loop says its mission is to “accelerate the world’s shift toward sustainable PET plastic and polyester fiber and away from our dependence on fossil fuels.” Hindenburg alleged in its report that the company’s earlier claims of breaking down PET, a common form of plastic, to its base chemicals at a recovery rate of 100 percent were “technically and industrially impossible” and that the company’s claims that it produced “industrial grade purity” base chemicals from PET were also false. 

“Former employees painted a picture of a chaotic company, whose lead scientists are twenty-something ‘liars’, with no relevant work experience other than Loop, that were able to achieve ‘impossible’ results in a secret second lab that rank-and-file employees weren’t allowed to access,” Hindenburg’s report said. “Loop’s supposed proprietary process is a black box that has not shown itself to be more efficient or cost effective than comparable solutions, contrary to the company’s claims, according to former employees and outside experts.”

Loop has formed partnerships that encouraged its investor base and lent credibility to its technology, including Coca-Cola, PepsiCo, and Danone, according to Hindenburg. But the short seller said Coca-Cola and PepsiCo would not confirm whether any plastic had been recycled as part of their partnerships with Loop, and that comments from Danone suggested it had not bought any plastic from Loop. Hindenburg said it suspects “these partnerships have gone nowhere.”

Hindenburg further alleged that a former Loop employee told the firm that the company’s scientists, under pressure from Loop CEO Daniel Solomita, “were tacitly encouraged to lie about the results of the company’s process internally” and said it has obtained internal documents and photos to back up their claims. 

Hindenburg cited an October 2020 investor presentation from the company, which went public in 2015 via a reverse merger, saying its process of breaking down PET plastic is “proven.”

“In other words, the company claims to have discovered how to turn worthless trash into pure gold, a feat that multi-billion chemical companies such as DuPont, Dow Chemical, and 3M have been unable to achieve on a large scale despite years of efforts,” Hindenburg wrote in the report.

Related Content