Financial report accuses Loop Industries of not having viable recycling tech. Loop says claims are “unfounded”

SUEZ and Loop Industries Infinite Loop
A mock-up of how the SUEZ and Loop Industries facility might look

Financial research and short selling company Hindenburg Research has accused plastics chemical recycler Loop Industries of being a “smoke and mirrors” operation with no viable technology.

Hindenburg, which claims it specialises in forensic financial research that aids its investment decisions, said that it had spoken to previous Loop employees, competitors, industry experts and company partners as part of its investigation into Loop.


It had also reviewed extensive company documentation and litigation records.

According to Hindenburg, its research uncovered that Loop has never generated any revenue and despite its claims of a “proven solution” that “our research indicates that Loop is smoke and mirrors with no viable technology”.

It also claimed that former employees revealed that “Loop operated two labs: one reserved for the company’s two twenty-something lead scientist brothers and their father, where incredible results are achieved, and a separate lab where rank-and-file employees were unable to replicate the supposedly breakthrough results”.

These brothers are Adel Essaddam and Fares Essaddam who invented and patented the Generation 2 technology that Loop says is a technological breakthrough.

Adel is lead scientist at the company and who according to his LinkedIn profile has a technical diploma in composite materials from CEGEP de Saint Jérôme and joined Loop in 2016 after finishing his education.

Fares is Loop’s technology lead and joined Loop in 2015 while still studying at Universite d’Ottawa.

The brothers, according to the report, learned much of what they know from the Gen 1 process that was patented by their father.

A former employee told Hindenburg: “They were friendly but at some point, when it was time to talk about results, they were hiding things and bypassing us to go present results to the boss. So, they would present their results and not ours. They had two faces.

“They had their father in the background for everything so they would discuss everything as a family. I have a couple of other friends that left because they could not stand it anymore.

“There was always a group saying ‘they did this again…they brought samples and wouldn’t tell them what it was’ and ‘when we gave results, they weren’t happy about it.”

Hindenburg also says that Loop’s claims that it can break down PET to its base chemicals at a rate of 100% were “technically and industrially impossible” and that its claims of producing industrial grade purity base chemicals from PET were false.

It reported that a former employee said that not only was the output not of industrial grade purity, but the process was failing.

The former employee is quoted saying the MEG (PET base chemical monoethylene glycol) “was not even isolated at that time” and it was “still mixed with dyes, water and solid wastes”.

This research report also notes that executives from a key partner Thyssenkrupp that Loop entered into a global alliance agreement with in December 2018 said that the partnership is on “indefinite” hold and that Loop “underestimated” both costs and complexities of its process.

It also said that Loop’s joint venture with chemical company Indorama is “still being finalised” according to an employee despite being announced in 2018.

On the Generation 2 technology, Hindenburg quotes a former employee: “When I was there, they were producing PET and the contaminants had to be very low. We were successful every ten batches maybes, because there was always a contaminant that was way too high.

“We trying to purify and repurify. Sometime we’d repurify a batch four, five, six times. On a material level, it’s impossible to be successful and make money off that. You’d have to send a batch back to reprocess because it’s full of contaminants – you can’t make money off that.”

The former employee also believes that the Generation 2 process would not be successful and that they did not have the technology they claimed. They said: “There were so many issues with the process that we left it alone and started a new process, but it wasn’t easier…I don’t think that it will be successful. Actually, I don’t think they have the technology. That would be my conclusion.”

Hindenburg says it has submitted its findings to regulators, but does not name which ones. The company has also taken a short position in Loop Industries in order to profit from any fall in the value of the company in the short-term.

In a statement provided to REB Market Intelligence, Loop Industries said the Hindenburg report contained “factual inaccuracies” and that:

“Hindenburg holds a short position in Loop Industries stock. Hindenburg Research has not engaged with Loop directly nor does Loop Industries believe Hindenburg Research has done the required due diligence for this report.

“The claims it makes are either unfounded, incorrect, or based on the first iteration of Loop’s technology, know as Gen 1, which was in use between 2014 and 2017. In 2017, Loop reinvented its process and developed its Gen 2 technology, which is at the core of Loop’s commercialisation projects.

“Loop’s focus remains on commercialising its technology to meet growing global demand of infinitely recyclable PET plastic and polyester fibre made from 100% recycled content.”

The full report can be viewed here

Loop Industries and Suez last month announced plans to build a PET-based chemical recycling plant in Europe.

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