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Summary:

As Kior misses its production targets, sees its stock drop dramatically, and lists doubts in a filing about its ability to continue as a going concern, an investor hits the company with a potential class action lawsuit.

KiOR

Following the news that next-gen biofuel company Kior failed to meet its biofuel production targets for last quarter, an investor in the company has filed a lawsuit (embedded below), and is seeking to make it class action, accusing Kior of misleading investors and making false statements. The suit, filed by investor Michael Berry, says the potential class could have hundreds or thousands of participants, and is seeking damages for losses.

Kior, a Khosla Ventures-backed startup that went public in the Summer of 2011, revealed in its second quarter earnings in early August that it was about 75 percent below its forecast for producing and shipping its next-gen biofuel last quarter. KiOR shipped 75,000 gallons last quarter from its Columbus, Mississippi plant, but was hoping to ship between 300,000 and 500,000 gallons in the quarter.

Kior stock over the past month

Kior stock over the past month

As a result of this shortfall, and its weak financial standing, Kior’s stock has fallen dramatically in recent weeks. As of Tuesday before the market opened, the stock is trading at $2.51 per share. KiOR went public in the Summer of 2011 at $15 per share.

Kior stock over two years

Kior stock over two years

Kior also says in its latest quarterly financial filing that it needs to raise cash through debt or equity by the end of September 2013 to fund its ongoing operations and to meet its debt requirements. The company says:

The lack of any committed sources of financing other than the remaining availability under the Loan and Security Agreement raises substantial doubt about the Company’s ability to continue as a going concern.

Berry maintains that Kior and Kior execs misled investors in terms of how far along the company was towards reaching steady-stage scaled-up commercial production. Many advanced biofuel companies can produce their fuel in small batches, but reaching a state of mass commercial production at high volumes and low costs has been the ongoing bugaboo for these companies. Many, many biofuel companies have gotten stuck at this stage of production and have determined they needed far more money and far more time to hit these milestones.

Kior emerged in late 2007 as a joint venture between Khosla Ventures and Netherlands-based biofuel startup BIOeCON. The company was funded mainly by Khosla Ventures, and the venture capital firm owns 82.3 percent of the combined voting power. Khosla Ventures isn’t named in the lawsuit, but Kior’s CEO and CFO are.

Kior has always been a high risk, long term play company. Read my assessment of Kior from about a year ago: The perils of cleantech investing: KiOR and the long term, high risk view.

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  1. Biofuel at its core is a solar energy-to-liquid capture process, using biology. It competes with semiconductor photovoltaic solar energy-to-grid. It is therefore possible and fair to compare efficiencies: 15% for PV. Until the tech improves, bio has an uphill road.

    1. – less than 1% conversion efficiency for bio, greater than 15% for PV

  2. No doubt the plaintiffs will prevail as Condi Rice the former secretary of state and KIOR board member claimed in march of this year that KIOR had made cellulosic fuel a “reality”. No immunity of office for a director. Condi had immunity of office in the missing weapons of mass destruction saga but the missing weapons of mass combustion may trip her up.

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