The U.S.-listed shares of Canadian company Standard Lithium Ltd. slid 22% Thursday, after short seller Hindenburg Research published a report alleging the company’s technology does not work and that’s it’s seeking to profit from the hype around lithium batteries for electric vehicles.
Vancouver-based Standard Lithium “is a zero-revenue mining company that uplisted to the NYSE in July 2021 with a fantastic-sounding story of being a first mover in direct-lithium-extraction (DLE), a technology that aims to revolutionize lithium mining,” the report says.
The company claims that technology allows it to extract lithium in hours, instead of the months the process typically requires, using far less land and groundwater than traditional extraction methods. That has made it attractive to companies, such as Koch Industries, which became its biggest shareholder last year via a $100 million investment.
“Koch missed red flags and failed in its due diligence in its haste to deploy capital,” Hindenburg said.
Koch responded with this statement: “As with all of our investments, Koch has 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. We remain excited to continue fostering innovation and growing the battery value chain across the Koch enterprise.”
Standard Lithium SLI, -25.93% SLI, -27.24% claims an Arkansas project is the “largest and most advanced” lithium brine project in the U.S. But it has not yet produced or sold commercial amounts of lithium, which is also used in cellphones and laptops.
Hindenburg cites experts who say about 100 attempts have been made by mining companies since the 1970s to get DLE to work and none have succeeded. Its partner in Arkansas, Lanxess said recently “that Standard’s extraction technology has still not demonstrated “proof of concept.” Lanxess says it has “no timeline” for development and is no longer mentioning Standard Lithium on its earnings calls,” said the report.
Despite its highflying claims for DLE, Standard Lithium has spent just C$1.7 million on R&D since going public, but has spent C$5 million on “advertising and investor relations.” In fiscal 2021, it spent zero on R&D, according to its annual report filed with the Securities and Exchange Commission.
The company’s auditor, Manning Elliott LLP, notes in its audit opinion that the company has not generated revenue or cash flow from operations since inception and has an accumulated deficit of C$68.6 million.
“These conditions raise substantial doubt about the company’s ability to continue as a going concern,” says the filing.
Hindenburg further alleges that the company’s chief executive Robert Mintak has a poor track record from at least nine public companies he has been involved with, none of which are profitable and most of which used extensive stock promotion.
The list includes Environmental Control Corp., a company that said it was aiming to develop emission control devices for gas engines. The stock rose 868% after many paid promotions in mid-2000s, but the company never produced revenue and eventually collapsed and became a special-purpose acquisition corporation via a reverse merger with Yong Bai Chao New Retail (Shenzhen) Co. Ltd. in 2021, according to a regulatory filing.
“Standard Lithium appears to us to be a regurgitation of Mintak’s prior company, Pure Energy Minerals, using the same Vancouver stock playbook as Mintak’s numerous other failed ventures,” said the report.
Standard Lithium did not respond to a request for comment.
The Canadian-listed shares have gained 73% in the past 12 months, while the S&P 500 SPX, -2.44% has gained 20%.