- Ginkgo Bioworks stock fell 24% on Wednesday after Scorpion Capital claimed the company was a “Frankenstein mix of the worst frauds”.
- Ginkgo went public last month via SPAC and counts Cathie Wood’s Ark Invest among its investors.
- Scorpion says most 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 sale report from Scorpion Capital alleged the synthetic biology company was a “Frankenstein mix of the worst frauds.”
Scorpion, which is short of SPAC’s recent IPO, alleged that much of Ginkgo’s revenue is phantom, or non-monetary, and instead relies on accounting gimmicks enabled by a network of shell companies. Scorpion based its claim on research and conversations with former and current employees of Ginkgo and the companies it works with.
“A senior employee [of one of Ginkgo’s customers] unequivocally stated that they never paid Ginkgo cash for foundry services and were simply using ‘free’ R&D credits as a result of Ginkgo and Viking investments,” the report said.
Ginko did not immediately respond to a request for comment.
Former short seller Andrew Left of Citron Research applauded Scorpion Capital’s research and said the company was “more of a ploy than a scam”. He said the company’s valuation was partly inflated by misaligned incentives from the parties that made it public, adding that it eclipses Ginkgo’s 2020 private funding valuation by about $5 billion. As of Tuesday, Ginko’s valuation was $23.6 billion.
“We can’t disagree that the title will probably be down 80% in short form,” Left said.
Such a steep drop would hurt investors like Cathie Wood’s Ark Invest, which currently holds $325 million worth of Ginkgo in its flagship Disruptive Innovation ETF and Genomic Revolution ETF.
But if a sharp 80% drop in Ginkgo materializes, Ark Invest might be unfazed and instead buy the drop based on its prior investment activity.
In August, Ark Invest suffered a sharp drop in its holdings in Zymergen, another synthetic biology company competing with Ginkgo. Zymergen plunged nearly 80% in a single day after pushing back its significant revenue generation schedule due to product development issues.
In response to Zymergen’s sharp drop, Ark Invest bought more shares of the company rather than pull back. Whether Wood is profiting from the current decline in Ginkgo shares will be known as soon as Ark releases its daily trading activity tonight.
“Behind the hype, Ginkgo is a glorified contract research organization that engineers basic yeast strains, with a decade of spectacular failure delivering anything of value to customers,” concluded Scorpio.