Pomerantz Appointed Lead Counsel in Ginkgo Bioworks Securities Litigation
On March 25, 2022, U.S. District Judge Yvonne Gonzalez Rogers of the Northern District of California (Oakland Division) appointed Pomerantz LLP as Lead Counsel on behalf of Sharon Bernstein, the Lead Plaintiff, and the class, in Stuart v. Ginkgo Bioworks Holdings, Inc., 4:21-cv-08943-YGR (N.D.Ca.). This securities action alleges that Ginkgo Bioworks Holdings, Inc. (f/k/a Soaring Eagle Acquisition Corp.) (“Ginkgo” or the “Company”) misrepresented and misclassified its sources of revenue in order to conceal its dependence on undisclosed related parties.
Ginkgo is a biotech company that operates a platform for cell programming, designed to enable biological production of products as diverse as novel therapeutics, key food ingredients, and chemicals currently derived from petroleum. The company was formed by a merger between Ginkgo Bioworks, Inc. and Soaring Eagle Acquisition Corp., a special purpose acquisition company (“SPAC”).
Allegations against Ginkgo include that: (i) the Company’s failed to derive real revenue from third-party customers left it almost completely dependent on related parties; (ii) as a result, most, if not all, of Ginkgo’s revenue came from related parties that it created, funded, or controlled through its ownership and board seats; (iii) the Company was misclassifying and underreporting related party revenue in order to conceal the its near total-dependence on related parties; (iv) many of the Ginkgo’s new R&D partners are undisclosed related parties and/or façades; and (v) as a result, the Company’s valuation was significant less than it had disclosed to investors.
On October 6, 2021, market research firm Scorpion Capital (“Scorpion”) released a report in which it alleged that Ginkgo is a “colossal scam,” and described the Company as a “shell game” whose revenue is highly dependent on related party transactions. The report alleged that Gingko is a “Frankenstein mash-up of the worst frauds of the last 20 years” and “one of the most brazen frauds of the last 20 years.” Scorpion based its report on an “intensive investigation into Ginkgo’s business model and practices, with a particular focus on the related-party entities that drive the bulk of its revenue.” As part of this investigation, Scorpion “completed 21 research interviews, encompassing a broad sample of former employees and executives of Ginkgo, as well as individuals who are currently employed at its related-party “customers.”
On this news, Ginkgo’s share price fell $1.39 per share, or approximately 12%, to close at $10.59 per share on October 6, 2021.
On November 15, 2021, Ginkgo acknowledged that shortly after the Scorpion Capital report, it had received an inquiry from the United States Department of Justice relating to the financial misconduct allegations in the report.