Shares of Loop Industries (LOOP) - Get Loop Industries, Inc. Report lost a third of their market value on Tuesday after the activist investment group Hindenburg published a report lambasting the plastics-recycling company and said it took a short position.
The investment firm said it interviewed former employees, competitors, industry experts and company partners as part of its investigation and concluded that Loop is "smoke and mirrors with no viable technology."
Loop, Terrebonne, Quebec, didn't immediately return a request for comment.
Former employees told Hindenburg that Loop operated two labs, one reserved for its "two twenty-something lead scientist brothers and their father" and one run by rank-and-file scientists who were unable to replicate results.
The investment firm said that a Loop employee told Hindenburg that scientists were pressured by Chief Executive Daniel Solomita to "lie about the results of the company’s process internally. We have obtained internal documents and photographs to support their claims."
The report also alleges that to help raise Loop's startup capital, Solomita hired a convict who had pleaded guilty to stock manipulation.
Loop has claimed to have developed a patented proprietary technology that breaks down a common plastic, PET, using "products purchased from the local hardware store," Hindenburg said.
"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, (DD) - Get DuPont de Nemours, Inc. Report Dow Chemical, (DOW) - Get Dow, Inc. Report and 3M (MMM) - Get 3M Company Report have been unable to achieve on a large scale despite years of efforts," Hindenburg said in its note.
Loop Industries shares at last check fell 34% to $7.69.