Danimer Scientific Inc.
|Company Name||Danimer Scientific Inc.|
|Class Period||October 05, 2020 to May 04, 2021|
|Lead Plaintiff Motion Deadline||July 13, 2021|
On Saturday, March 20, 2021, The Wall Street Journal published an article entitled “Plastic Straws That Quickly Biodegrade in the Ocean? Not Quite, Scientists Say” addressing, among other things, Danimer’s claims that Nodax, a plant-based plastic that Danimer markets, breaks down far more quickly than fossil-fuel plastics. The article alleges that according to several experts on biodegradable plastics, “many claims about Nodax are exaggerated and misleading.” According to the article, Jason Locklin, the expert who co-authored the study touted by Danimer as validating its material, stated that Danimer’s marketing is “sensationalized” and that making broad claims about Nodax’s biodegradability “is not accurate” and is “greenwashing.”
On this news, the Company’s stock price fell $6.43 per share, or roughly 13%, to close at $43.55 per share on March 22, 2021.
On April 22, 2021, Spruce Point Capital Management (“Spruce Point”) published a research report entitled “When the Tide Goes Out, What Will Wash Ashore?” In addition to the concerns about Danimer’s product biodegradability claims, the report found “multiple conflicting sources of Danimer’s facility sizes and production capacity” and “inconsistencies between reported figures and city filings for Kentucky facility capital costs.” The report also raised doubts about the strength of the Company’s purported partnerships with Pepsi and Nestlé because Pepsi recently sold its equity stake in Danimer and “both the top Pepsi and Nestlé executives with close relationships to Danimer recently resigned.”
On this news, the Company’s stock price fell $2.01, or 8%, to close at $22.99 per share on April 22, 2021, on unusually heavy trading volume.
On May 4, 2021, Spruce Point published a follow-up report. Citing information obtained via a Freedom of Information Act (“FOIA”) request from the Kentucky Department of Environmental Protection, the report alleged that “Danimer’s production figures, its pricing, and rosy financial projections are wildly overstated” and that its Kentucky facility received a notice of compliance violations from the Division for Air Quality. Moreover, “Danimer’s PHA average selling price appears to be 30% - 42% below management’s claims.”
On this news, the Company’s stock price fell $4.48, or 20%, over three consecutive trading sessions to close at $17.66 per share on May 6, 2021, on unusually heavy trading volume.
The complaint filed alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that biodegradable materials such as Nodax could take years to break down; (2) that, as a result, the Company’s marketing claims that Nodax products could biodegrade within months were exaggerated and misleading; (3) that monthly biopolymer production and natural gas usage at the Company’s Kentucky and Georgia facilities were materially overstated; (4) that Danimer faced compliance violations for its Kentucky facility from the Division of Air Quality; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis. The first-filed case is pending in the United States District Court for the Eastern District of New York, captioned Rosencrants v. Danimer Scientific, Inc., et al., Case No. 1:21-cv-02708.
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