M&A, Corporate and Financial News

Is a US Company Bullying The market?

The stock price of Italian bioplastics maker Bio-On srl fell just over 10 percent on July 24 after the release of a scathing report by a U.S. investment firm.

Accusations

Quintessential Capital Management of New York issued a very critical report on Bio-On on July 19. In the 18-page report, QCM officials said that “after meticulous collection and analysis of information, we came to the opinion that Bio-On is a ‘house of cards,’ a scheme conceived by management to enrich themselves on at the expense of shareholders.”

The report added that although Bio-On is “a seemingly successful company boasting growing revenue and profits,” the Bologna-based firm “is actually a massive bubble based on flawed technology and ‘fictitious’ sales thanks to a network of empty shell companies.”

Bio-On’s share price dropped 10.3 percent to 49.60 euros (US $55.27) in trading on the Borsa Italiana. The price had been above 68 euros in late 2018.

Back to Reality

The accusation of Quintessential Capital Management does not seem to reflect reality.  Bio-On has been one of the most active  and succesfull bioplastics company in the past 12 months.

In May, Bio-On reported a profit of 33.5 million euros on sales of 51 million euros for 2018. Both of those totals are up substantially from 2017.

In January, the firm announced a partnership with consumer products giant Unilever to use bioplastic micropowders in My Kai brand sunscreens. Bio-On’s micropowders won a Best Practices Award in 2018 from global consulting firm Frost & Sullivan.

Since late 2018, Bio-On has announced partnerships to build bioplastic production sites in Russia and Mexico, as well as the formation of Zeropack, a joint venture with agricultural firm Gruppo Rivoira to make packaging for fruits and vegetables.

Stock Manipulation?

A little more than 10 percent of Bio-On’s shares are publicly traded. Company executives Marco Astorri and Guido Cocagnani — who co-founded Bio-On in 2007 — each own stakes of almost 11 percent. The remaining shares — almost 68 percent of the total — are owned by Capsa srl, a lumber and woodworking equipment firm based in Milan.

Do you think Quintessential Capital Management is trying to influence the stock price? Do you think QCM took certain positions on the financial market to benefit from a drop in the stock price of Bio-On?

Funnily enough, Quintessential Capital Management wrote in their report that it “has an economic interest in the price movement of the securities mentioned in this report,” which typically means the firm has a short position in the stock.

Its not the first time that QCM does this type of shaming. In fact, they call them QCM Campaigns. Here’s a screenshot of their website.

Bio-On Replies

Bio-On officials denied the report’s allegations and said they were considering legal action against the investment firm.

In a July 24 response, Bio-On officials said that the firm “totally denies the assertions that would attribute to Bio-On’s management incorrect behaviors and that the company is communicating false information to the market.

“What has been published is subject to the company’s and its lawyers’ evaluation for the purpose of its own protection against potential price manipulations by hedge funds,” they added. “The fund author of the report clearly declared an economic interest in the company stock price reduction, as reported in its disclaimer.”

In a separate response, Bio-On officials confirmed that its Bologna-area plant “is fully operative and active in PHA production.” In their report, QCM officials had questioned the status of that plant.

Bio-On officials added that the production plant “is central to the company’s business to create a new standard in PHA production, proved on industrial scale, and accelerating PHA spread in the biopolymers market.”

They added that the plant “has been visited over the last few months by multiple public, financial and industrial players, to whom the full operation…was shown.”

Closing Remarks

The market share of Bioplastics will boom in the coming months. PHA is considered to be one of the most promising bioplastics and Bio-On is the leader in PHA.

Do you think the US financial markets know something that we don’t? Do you think the US financial market are looking to make huge profits in the bioplastics sector?

Read the follow up on this:

Bio-On Reassures The Market

REFS

plasticsnews.com – Italian bioplastics maker denies allegations made by US investment firm

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