Recycled-Plastic Maker Loop Denies Short Seller's Accusations -- 3rd Update
By Dieter Holger
Loop Industries Inc. denied accusations by short seller
Hindenburg Research that the company lied about its
Hindenburg--which holds a short position in Loop stock and said
its report is based on photos, internal Loop documents and
interviews with former Loop employees--said Tuesday that Loop's
scientists were encouraged by management to falsify results about
the technology and that other employees were unable to
independently reproduce breakthroughs made in a separate lab.
Short sellers profit when a company's stock price falls.
Loop's stock price fell more than 32% Tuesday following the
accusations. The stock lost 3.6% more on Wednesday, closing at
$7.55 a share.
The Wall Street Journal hasn't independently verified whether
the report's accusations are accurate.
Canada-based Loop said Tuesday that Hindenburg's claims were
either unfounded, incorrect or that allegations about its
"infinitely recyclable" polyethylene terephthalate plastic,
commonly known as PET, were "based on the first iteration of Loop's
technology, known as Gen 1, which was in use between 2014 and
"In 2017, Loop reinvented its process and developed its Gen 2
technology, which is at the core of Loop's commercialization
projects," the company said.
Hindenburg's report also said Loop Chief Executive Daniel
Solomita hired a former convict, who had previously pleaded guilty
to stock manipulation in 1989, to help raise money for the company.
Additionally, Hindenburg said it suspected that Loop's partnerships
with Danone SA, Coca-Cola Co., PepsiCo Inc. and chemical company
Indorama Ventures PCL haven't resulted in any plastic being
recycled or supplied.
"We expect Loop will never generate any meaningful revenue,"
Hindenburg said, adding that it has submitted its allegations to
A Loop spokeswoman on Wednesday declined to offer details in
response to the other claims in the report.
Loop's promise of "infinitely recyclable" plastic has drawn
partnerships from food and beverage companies looking to green up
their packaging to meet demand from eco-conscious consumers.
A Coca-Cola spokesman said Loop made an agreement with the
company in 2018 so it could supply recycled plastic to the beverage
giant's bottlers. But the spokesman didn't share whether Loop had
supplied any plastic so far or if Coca-Cola had conducted due
dilligence of Loop's technology. A spokeswoman for Coca-Cola's
largest bottler in Europe, Coca-Cola European Partners PLC, said it
has yet to receive any plastic from Loop.
"It is one of the many technology partners we have engaged with
to ensure we have a diversified mix of potential solutions," the
Coca-Cola spokesman said. "We know there's more to do and we
continue to evaluate several solutions to accelerate
commercialization of technologies that allow us to make new bottles
out of old bottles."
A Danone spokesman said the company has received plastic from
Loop for a small pilot production of recycled bottles to explore
the technical feasibility of using Loop's plastic. "We take note of
the results of the Hindenburg Research report and will conduct
internal research and due diligence," he said.
A PepsiCo representative said she would forward a request for
comment to the company's plastics team. An Indorama spokesman said
they were still looking into the accusations by Hindenburg.
In September, Loop penned a deal with French waste manager Suez
SA to build a factory in a yet-to-be announced location in Europe.
The companies said they would decide the factory's location in
mid-2021 and expect it to start operating in 2023.
It would be able to produce the equivalent of about 4.2 billion
beverage bottles a year made of "100% recycled and infinitely
recyclable PET plastic," the companies said.
When asked for comment on whether it had conducted due diligence
on Loop's technology, a Suez spokeswoman on Wednesday pointed to
Loop's Tuesday statement, which had no mention of the factory deal.
She said Suez was waiting for more information before the company
could comment further.
Last month, Hindenburg Research accused electric-truck startup
Nikola Corp. of being an "intricate fraud" and said its founder
Trevor Milton misled investors, leading to Mr. Milton's resignation
as executive chairman, which he said would help the company better
focus on the business. The allegations prompted a probe by the U.S.
Justice Department and the Securities and Exchange Commission.
Nikola denies the allegations and last week presented more
information on its hydrogen technology to investors.
Write to Dieter Holger at firstname.lastname@example.org
(END) Dow Jones Newswires
October 15, 2020 17:29 ET (21:29 GMT)
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