Short seller Hindenburg Research alleged on Thursday that Standard Lithium Inc’s plan to produce lithium for electric vehicle batteries in Arkansas is based on technology that does not work, sending Standard’s shares down 27% and erasing $305.7 million from the company’s market value.
Hindenburg, which did not disclose the size of its short position, alleged that Standard’s technology is “struggling out of the gate” and based on patents that were rejected by U.S. officials.
Vancouver-based Standard pushed back against the allegations, noting that it has been operating a pilot facility in Arkansas to test its technology for more than 20 months and given regular public updates.
Standard added in a statement that it is “confident in its lithium extraction technology” and that all of its patent applications are “active and continue to be prosecuted in the ordinary course.”
Koch Industries Inc, which invested $100 million in Standard last fall and is its largest shareholder, also defended the company’s technology.
Short sellers sell borrowed shares in the hope of buying them back at a cheaper price and pocketing the difference. Roughly 2.6% of Standard’s 154.4 million outstanding shares are being used to short as of Thursday, according to Refinitiv data.
Short seller Blue Orca published a report similar to Hindenburg’s last November casting doubts on Standard’s technology, allegations that the company denied at the time.
Standard is part of a growing wave of companies attempting to use direct lithium extraction (DLE) technologies to produce the white metal at commercial scale. The technologies differ by company, but share the goal of using less land and groundwater than hard rock mining and evaporation ponds, the traditional ways to process lithium.
Standard has said its proprietary DLE technology uses an adsorption process to filter lithium from brine, which it sources from a Lanxess bromine facility in Arkansas. The company has not produced or sold commercial quantities of lithium.
Effectively, Standard promises to extract lithium from wastewater in a way that would have very little environmental footprint, a tantalizing prospect for investors and automakers.
Lanxess, though, believes Standard has yet to demonstrate the project’s “proof of concept,” Hindenburg said, citing unnamed Lanxess officials.
Lanxess declined to comment.
Hindenburg added that it believed Koch “missed red flags and failed in its due diligence in its haste to deploy capital.”
Koch spokesperson Christin Fernandez disagreed, saying the company “conducted extensive due diligence and found Standard Lithium’s technology a promising bright spot on the path towards lithium production here in the U.S.”
Hindenburg also alleged that Standard is part of a long-running stock promotion scheme by Chief Executive Officer Robert Mintak. Mintak declined to comment when reached by phone on Thursday.
Standard defended Mintak in its press release, saying he “has built a large and dynamic team with a broad and diverse skill set.”
Hindenburg’s report claims that Standard has only spent C$1.7 million ($1.3 million) on research and development. Standard disputed that figure, noting it has spent about C$29.4 million to open the Arkansas pilot plant and another C$6.9 million to operate it.
New York-based Hindenburg has in the past targeted Nikola Corp, Lordstown Motors and other companies involved in the booming EV industry.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.