Danimer Scientific Lied About its Products, Falsely Inflating Share Prices, Class Action Claims

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Biopolymer plastics manufacturer Danimer Scientific and its executive team and board lied to investors and about the company’s products, operations, and compliance in order to inflate share prices, a new class action lawsuit alleges.

The nationwide class action lawsuit was filed in New York on May 14 by lead Plaintiff Darryl Keith Rosencrants, who alleges that the company and its executive team and board violated the Securities Exchange Act and caused shareholders significant damages.

Rosencrants alleges that the company’s board and executives failed to disclose that Danimer had deficient internal controls; misrepresented its operations’ size and regulatory compliance; overstated its patented product Nodax’s biodegradability, and, as a result, the company’s public statements were materially false and misleading.

“As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages,” the claim alleges.

Danimer, formerly known as Live Oak Acquisition Corp, was a publicly traded special purpose acquisition company, when it merged with Meredian Holdings Group, Inc., (doing business as Danimer Scientific) in December 2020, the class action lawsuit says.

Danimer Scientific was operating as a performance polymer company specializing in bioplastic replacements for traditional petrochemical-based plastics.

Following the merger, Live Oak changed its name to Danimer Scientific, Inc., (Danimer) and took over the biopolymer plastics business, replacing its management with the original Danimer management team, the claim explains.

Prior to and following the merger, Danimer has sold polyhydroxyalkanoates under its proprietary “Nodax” brand name for use in a wide variety of plastic items, including water bottles, straws, and food containers, among others.

The company touts Nodax as being 100 percent biodegradable, renewable, and sustainable plastic, which is purportedly superior to traditional plastics because of its advanced biodegradability.

However, in March 2021 the Wall Street Journal published an article entitled “Plastic Straws That Quickly Biodegrade in the Ocean, Not Quite, Scientists Say,” which said that, according to several experts on biodegradable plastics, “many claims about Nodax are exaggerated and misleading.”

“While Danimer reportedly asserts its claims are factual, the article cites at least one expert as stating that making broad claims about Nodax’s biodegradability ‘is not accurate’ and is ‘greenwashing’,” the claim states.

Then in April 2021, Spruce Point Capital Management published a report on Danimer, noting red flags and various inconsistencies with in the company’s historical and present claims regarding the size of its operations, Nodax’s makeup and degradability, and the company’s expected profitability, according to the class action lawsuit.

On May 4, Spruce Point published a second report on Danimer alleging that the company had “wildly overstated” production figures, pricing, and financial projections based on documents it had acquired from the Kentucky government, “all of which cast serious doubt on the integrity of the Company’s internal controls,” the claim states.

The company also hid internal allegations of wrongdoing and dissension in the merger process, including top executives paying settlements for fraud and violations of the Securities Exchange Act, the claim states.

As the company’s alleged wrongdoing was exposed, share prices in Danimer plummeted, damaging shareholders, according to the class action lawsuit.

Rosencrants wants to represent anyone who purchased or acquired Danimer securities between December 30, 2020 and March 19, 2021. He is suing for violations of the Securities Exchange Act and seeks certification of the Class, damages, interest, legal fees and costs, and a jury trial.

Danimer isn’t the only company facing legal action over alleged share price inflation. This month, Lordstown Motor Corporation was hit with a class action lawsuit after it allegedly lied to investors about the demand and production capabilities of its electric trucks, inflating share prices and causing investors serious losses.

Recycling company PureCycle was also hit with a class action lawsuit for allegedly lying to investors about its expected revenue and product – which the claim says was not proven and presented serious issues, even at lab scale.

Have you ever bought shares in a new company to have them drop within weeks? Let us know in the comments section!

Rosencrants is represented by Jeremy A. Lieberman, J. Alexander Hood II, and James M. LoPiano of Pomerantz LLP.

The Danimer Securities Exchange Act Violations Class Action Lawsuit is Rosencrants v. Danimer Scientific Inc., et al., et al., Case No. 1:21-cv-02708-MKB-RLM, in the United States District Court Eastern District of New York.

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