- Ginkgo Bioworks stock plummeted as much as 24% Wednesday after Scorpion Capital alleged the company is a “Frankenstein mash-up of the worst frauds.”
- Ginkgo went public last month via SPAC and counts Cathie Wood’s Ark Invest as an investor.
- Scorpion claims the bulk of the synthetic biology company’s revenue is based on accounting gimmicks.
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Ginkgo Bioworks stock plunged as much as 24% on Wednesday after a short-seller report from Scorpion Capital alleged that the synthetic biology company is a “Frankenstein mash-up of the worst frauds.”
Scorpion, which is short the recent SPAC IPO, alleged that a bulk of Ginkgo’s revenue is phantom, or non-cash based, and instead is based on accounting gimmicks enabled by a web of shell companies. Scorpion based its allegation on research and conversations with former and current employees of both Ginkgo and the companies it works with.
“A senior employee [of one of Ginkgo’s customers] stated unequivocally that they have never paid Ginkgo cash for foundry services and are merely using ‘free’ R&D credits following investments by Ginkgo and Viking,” the report said.
Ginko didn’t immediately respond to a request for comment.
Former short-seller Andrew Left of Citron Research applauded Scorpion Capital’s research and said the company is “more of a scheme than a scam.” He said the company’s valuation was in part inflated by misaligned incentives of the parties that brought it public, adding that it dwarfs Ginkgo’s 2020 private funding valuation of about $US5 ($AU7) billion. On Tuesday, Ginko’s valuation was $US23.6 ($AU32) billion.
“We cannot disagree that the stock will probably be down 80% in short form,” Left said.
Such a steep decline would hurt investors like Cathie Wood’s Ark Invest, which currently owns a combined $US325 ($AU446) million of Ginkgo in its flagship Disruptive Innovation ETF and Genomic Revolution ETF.
But if a steep 80% decline in Ginkgo does materialize, Ark Invest might be unfazed and instead buy the dip based on its prior investment activity.
In August, Ark Invest suffered a steep decline in its holdings of Zymergen, another synthetic biology company that competes with Ginkgo. Zymergen plunged almost 80% in a single day after it pushed back its timeline in generating meaningful revenues due to product development issues.
In response to Zymergen’s steep decline, Ark Invest purchased more shares of the company rather than backing away. Whether Wood is taking advantage of today’s decline in Ginkgo stock will be known as soon as Ark publishes its daily trading activity this evening.
“Behind the hype, Ginkgo is a glorified contract research organization that does commodity yeast strain engineering, with a decade of spectacular failure in delivering anything of value for customers,” Scorpion concluded.