Danimer Scientific, Inc. (update 2)
- In our initial report and our first follow up report, we warned about Danimer Scientific (NYSE: DNMR or the Company) and its capital expenditure and capacity anomalies, as well as history of obscuring failure from current investors. We believe Danimer’s response to our claims to be empty statements backed by little to no evidence that alters our opinion. We felt strongly enough to share our findings with regulators. We are happy to report that the State of Kentucky’s securities regulator, after reviewing our findings, has “opened a formal inquiry” into Danimer.
- On Danimer’s recent Q1’21 earnings call, management unexpectedly raised its capital expenditure guidance by 16% – 20%, which reaffirms our belief it suffers from poor financial and operational planning. In addition, CEO Stephen Croskrey made statements about being unable to raise prices further, and the impact of canola oil, that conflict with the Company’s claim of unfettered demand and sold-out capacity. Management is claiming “bottlenecks” in its Kentucky expansion, but we’ll provide evidence that shows broader problems in Georgia with its “greenfield” expansion.
Spruce Point has received an additional Freedom of Information Act (FOIA) response that further calls into question its Bainbridge, GA facility’s capacity utilization and accuracy of its PLA revenue reporting. PLA accounts for approximately 71% of Danimer’s sales and is produced solely in Bainbridge, GA. We now have monthly utility records from its Bainbridge facility which show a material, 70%+ YoY decline in water usage. We believe water is a key input that should highly correlate to the production of PLA. The declines have continued into Q2’2021. On the year end 2020 conference call, the CEO stressed the PLA business would grow in 2021. However, this is clearly not true so far. When analyzing Danimer’s reported decline in Q1’2020 PLA revenue vs. the implied decline in Georgia related revenue over the past year, we believe the figures simply do not reconcile. In addition, Danimer’s new disclosures on Q1’2020 PLA revenue now also point to possible revenue misrepresentation.
We reiterate our intermediate and long-term belief that Danimer’s shares should trade between $0 and $8.75 per share.