This case involves a renewable products company that alleged it would be able to provide sustainable alternatives to a broad range of petroleum-sourced products, from new sources of natural energy and solar panel designs to inventive replacements for traditional fuel-cell models. The company in question then had an IPO, resulting in a large rush of investment. However, it was quickly determined that the company was unable to deliver several of its core products in a time frame and scale that the company had promised investors. As a result, the company’s stock rapidly lost value, causing several investors to sue for material misrepresentations allegedly made by the company before its IPO.
Question(s) For Expert Witness
- 1. Are you able to discuss standard business practices for renewable energy companies?
- 2. Are you familiar with the barriers to entry for renewable energy companies?
- 3. Could you evaluate a company and offer an opinion on its chances for success?
Expert Witness Response E-007186
I am able to discuss standard business practices for renewable energy companies. I have seen it from the inside as a Vice President at several large energy companies, as well as from the outside in my capacity as a consultant, often up close and personal. I am familiar with the barriers to entry for renewable energy companies. If a company is looking for a fuel precursor, that company must deliver a product that fits the existing infrastructure. Alternatively, is the company is not in the fuels business, then it is in the infrastructure business. Regarding scale, no refiner will take you seriously unless you can deliver at least 10,000 barrels per day. Thirdly, if you are looking at this particular product area, there are companies that think they can make a new fuel from a totally different approach, but that simply will very rarely work Specialized fuels are a highly complex mix comprising almost countless different hydrocarbons that together meet the spec. Generally speaking, it is not difficult to inflate investor expectations beyond what is technically or economically feasible.
Expert Witness Response E-007187
I have over 30 years of experience in large-scale petroleum projects. I have led many projects in biofuels, biomass and bioenergy all under the heading of “renewable energy companies” including being an expert witness as well as an officer of a publicly traded company. My leadership experience is in biofuels, biomass, petroleum, biotechnology and related fields. I know best practices since I have been associated with many projects where standard practices played a role in the success or failure of the project. The companies I have been involved with range from publicly traded entities, to those backed by venture capital or similarly situated private equity funds. I can evaluate a company with an eye towards rendering an opinion on the likelihood of its success or failure. In this case, it appears that the company overstated it’s ability to deliver its product, which is not an uncommon occurrence in emerging industries such as bio fuels.