NEW YORK – Shares of Twist Bioscience closed down 20 percent on Tuesday after an activist investor published a report alleging fraud at the synthetic DNA maker.
Scorpion Capital, a short seller that has gone after other synthetic biology firms including Berkeley Lights and Ginkgo Bioworks, suggested that Twist has overstated the capabilities of its DNA manufacturing technology and also was engaged in a "Ponzi-like scheme based on price dumping and customer subsidies to buy revenue and create the illusion of 'growth.'"
"Sometimes we short charlatans peddling some technological gimmick as a world-changing innovation, and other times we look for fraud that is more accounting or financial in nature," Scorpion added. "Management with the hubris and guile to try both tricks at once is less common. Twist Bioscience is one of these extreme outliers, promoting a preposterous, fatally flawed, and failed technology [...] combined with a camouflaged pricing, accounting, and capital-raising scheme that is the closest thing we've recently seen to a textbook Ponzi."
In a statement released after the close of the market Tuesday, Twist said it "believes that the short-seller report issued by Scorpion Capital is highly misleading, with many distortions and inaccuracies. Unlike the author of the short-seller report, Twist is a public company, and is committed to communicating truthfully, creating value for all shareholders, and being good stewards of capital."
Scorpion said its 150-page report, issued Monday, is based on conversations with Twist customers, competitors including Danaher's Integrated DNA Technologies, and former Twist employees, but it did not generally name them.
The report alleged "escalating manufacturing delays, product limitations, a lack of sample purity, and quality control." These claims follow disclosures from a year ago of a production shutdown that impacted Twist's fiscal Q4 2021 revenues.
In addition, Scorpion claimed that Twist's increasing losses are the result of "an unsustainable scheme that purchases 'growth' with a price-dumping strategy by subsidizing customers with prices 50-90 percent[plus] lower than the competition — well below its cost of goods."
In September 2021, a Scorpion issued a similar report alleging fraud at Berkeley Lights, tanking shares of that firm by 30 percent. However, those shares gained back 19 percent the following month.
Shares of Twist fell as low as $25.65 in Tuesday trading on the Nasdaq before closing at $30.43. In Wednesday morning trading, shares fell another 11 percent to $27.00.
Twist is scheduled to release its fourth quarter and full-year fiscal 2022 results before the market opens this Friday.