Energy Recovery, Inc. (ERII) Accused of Misleading Shareholders
In October 2015, Energy Recovery, Inc. (ERII) announced the signing of a fifteen-year deal with Schlumberger Technology Corp. (“Schlumberger”) in which Schlumberger received the exclusive right to the use of Energy Recovery’s VorTeq technology for a $75 million exclusivity fee as well as additional $50 million milestone payments in 2016. Energy Recovery depended upon this deal for the commercialization of its VorTeq technology and to secure a stream of revenue, which was projected to reach $12 to $14 million in 2020. Throughout the relevant period, Energy Recovery continued to tout that the commercialization of VorTeq was on track, and as late as May 2020, the Company reiterated their expectation of reaching $12 to $14 million in license revenue. Despite assurances, on June 29, 2020, Energy Recovery announced the early termination of its Schlumberger License Agreement citing “different strategic perspectives as to the path to VorTeq commercialization.” Energy Recovery went on further to detail that all payments between the parties would cease and Energy Recovery would now be solely responsible for VorTeq’s global commercialization. On this news, shares of Energy Recovery fell almost 16% to close at $7.59 per share.