Loop Industries plunges 22% after a short-seller accused its patented plastic-recycling technology of being 'very misleading'
- Loop Industries' shares fell 22% on Tuesday after Hindenburg Research alleged the company's plastic-recycling technology is highly misleading.
- The short-seller blasted Loop's independent review for using the word "pure" loosely and for not providing any details on the economic viability of its technological process.
- "Information on purity without cost and yield is incomplete to the point of being irrelevant," Hindenburg said.
- A chemistry specialist concluded that it would be wrong to declare Loop's process as efficient and cost-effective based on the information provided in its review.
Shares in plastic-recycler Loop Industries plummeted 22% on Tuesday after short-seller Hindenburg accused the company of misleading investors over its patented technology.
Loop released an independent review of its process on Monday that Hindenburg said indirectly confirms the ineffectiveness of its so-called pure PET plastics made from "100% recycled content."
Although the review was meant to highlight the effectiveness of Loop's technology, a disclaimer at the end of the filing states the verification was not intended to validate the yields, or economic viability of the process. That, Hindenburg said, shows its analysis was largely meaningless.
"Information on purity without cost and yield is incomplete to the point of being irrelevant," the report said. Hindenburg said a former Loop employee substantiated that claim, by saying the review means nothing if quantitative aspects of the process are absent.
The short-seller called out Loop for using the word "pure" too often in its review. In Loop's second-quarter SEC filing, the company claims its recycling process has "consistently high monomer yields, excellent purity, and improved conversion costs."
Hindenburg noted another veteran chemistry specialist saying that Loop's independent review was "non-technical marketing material" and "very misleading." He concluded that it is wrong to declare Loop's process as efficient and cost-effective based on the information provided in its review.
Hindenburg published a report in October that stated Loop's "revolutionary" technology inflates its real capabilities. That sent the company's shares lower by 39% at the time. The short-seller has also called out EV-makers Nikola and Chinese automaker Kandi for misleading investors.
Loop Industries told Business Insider it stands by its technology, which was rendered effective by independent agency Kemitek.
"These results are consistent with previous trials and testing evaluations of our technology," a company spokesperson said in an email. "We look forward to moving ahead with our plans to bring our technology to commercial scale with our partners."