Twist Bioscience Corporation (TWST) Overstated the Commercial Viability of its Synthetic DNA Manufacturing Technology While Engaging in Accounting Fraud
A shareholder filed a class action on behalf of all investors who purchased or otherwise acquired Twist Bioscience Corporation (NASDAQ: TWST) common stock between December 13, 2019 and November 14, 2022, for violations of the Securities Exchange Act of 1934. Twist is a biotechnology company that manufactures synthetic DNA and DNA products.
According to the complaint, during the class period, defendants repeatedly assured investors that the Company possessed innovative proprietary technology relating to its synthetic DNA products that positioned Twist for significant future growth. Defendants reported skyrocketing gross margins, which purportedly grew from 12.8% in fiscal year 2019, to 39.1% in fiscal year 2021, with margins projected to reach 40% for fiscal year 2022. Defendants also announced plans to build a “Factory of the Future” in Wilsonville, Oregon, which would purportedly provide hundreds of jobs and occupy 110,000 square feet. By August 2022, when Twist reported its financial results for the third quarter of fiscal year 2022, Defendants projected annual capital expenditures between $95 million and $100 million, largely attributable to “building out” this new manufacturing facility.
Onn November 15, 2022, Scorpion Capital published a lengthy report alleging that Twist is “a cash-burning inferno that is not a going concern.” Specifically, Scorpion alleged that, among other things, Twist’s purported DNA chip technology is a “farce” comparable to Theranos Inc.’s now infamous non-existent blood-testing technology, and that the Company’s growth and revenues are unsustainable, among other issues. According to Scorpion, Twist is perpetuating its fraud through false reporting of capital expenditures and gross margins—which Scorpion claims are actually negative. Scorpion’s investigation of the forthcoming Oregon Facility revealed no evidence that the Company is preparing to begin manufacturing there, suggesting that the Company is using the facility to hide large operating expenses as fraudulent capital expenditures. Scorpion concluded that Twist is “operating a Ponzi-like scheme that will end in bankruptcy.” In response to these revelations, the price of Twist common stock fell $7.57 per share, or nearly 20%, from a close of $38.00 per share on November 14, 2022, to close at $30.43 per share on November 15, 2022.
What Now: Shareholders who acquired shares of Twist Bioscience Corporation between December 13, 2019 and November 14, 2022, must file their papers to be appointed lead plaintiff for the class by February 10, 2023. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. You do not have to participate in the case to be eligible for a recovery.
All representation is on a contingency fee basis. Shareholders pay no fees or expenses.