Loop Industries plummets 39% after a short-seller report claims its plastic-recycling technology doesn’t work

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The same short-seller that targeted Nikola in September has set his sights on a new name: Loop Industries.
In a report released on Tuesday, Hindenburg Research alleged that Loop Industries’ technology for recycling plastics didn’t work, describing it as “smoke and mirrors.”
Shares of Loop Industries fell as much as 39% on Tuesday.
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The same short-seller that targeted Nikola in September is now alleging that another company “is smoke and mirrors” and is inflating its technological capabilities.

In a report released on Tuesday, Hindenburg Research alleged that Loop Industries was peddling plastic-recycling technology that didn’t work.

Investors have taken note of what Hindenburg has to say since its September report on Nikola led to a drawdown of nearly 50% in that stock.

Loop Industries says it uses proprietary technology that can break down so-called PET plastics into base building blocks that can then be recycled.

Hindenburg said that “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 said that Loop Industries had never generated any revenue and that nothing had materialized from its announced partnerships.

The firm said that it didn’t expect Loop Industries to “generate any meaningful revenue” and that it saw 100% downside potential in the stock.

“With a market cap of ~$515 million, we see 100% downside to Loop once it burns through its ~$48 million in balance sheet cash,” Hindenburg said.

Shares of Loop Industries were down as much as 39% on Tuesday. Hindenburg disclosed that it was short shares of Loop Industries.

Hindenburg said its research was based on interviews with former employees, competitors, industry experts, and company partners. The firm said it also reviewed company documents and litigation records.

Loop Industries didn’t immediately respond to Business Insider’s emailed request for comment.