What happened
Shares of Twist Bioscience (TWST -10.22%) were crashing this week, plunging 37.2% as of the market close on Thursday, according to data provided by S&P Global Market Intelligence. The steep decline came after Scorpion Capital announced on Tuesday that it was short-selling the stock and released a scathing online report about the synthetic DNA maker.
Scorpion accused Twist Bioscience of being “a cash-burning inferno that is not a going concern.” Among the short-seller’s allegations were that Twist is “resorting to a Worldcom-esque accounting fraud,” its reported gross margins are “simply implausible,” and the company’s Oregon factory of the future appears to be deserted.
So what
Twist Bioscience quickly responded publicly to Scorpion Capital’s attack. In a press release Tuesday evening, the company called Scorpion’s report “highly misleading, with many distortions and inaccuracies.” However, Twist didn’t provide details about which specific allegations in the short-seller’s report were inaccurate. The company did, though, state that it plans to ship products from its Oregon factory beginning in January.
It’s difficult for investors in cases such as this to know exactly what to believe. Because Scorpion is shorting the stock, it has a financial interest in driving Twist’s share price lower. But Twist’s initial response didn’t seem to be enough to calm anxious investors.
Now what
Twist will hold its fiscal 2022 quarterly conference call on Friday morning at 8 a.m. ET. If the company’s management doesn’t directly address Scorpion’s allegations during this call, analysts probably will. Investors will potentially be able to soon gain a better understanding about how much of the short-seller’s report to believe or not believe.
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Twist Bioscience Corporation. The Motley Fool has a disclosure policy.