June 4, 2024 - SHORT CIBUS (Nasdaq: CBUS)
Cibus Inc. (“CBUS”) is a North American agricultural technology company that develops and licenses its unique plant traits to seed companies for royalty fees. Cibus’ primary objective is to increase yields for farmers while reducing the use of crop protection chemicals and fertilizers resulting in higher farmer profits. Founded in 2001, Cibus’ technology has a “trait machine” that includes/excludes certain desirable/undesirable genetic traits for a particular genome (such as pod shatter resistance, herbicide tolerance, drought tolerance, disease resistance, etc.) faster and cheaper than competing technologies.
We found no evidence that Cibus’ gene-editing technology brings desirable new crops to market. Instead, we found farmer complaints of lower crop yields and lost revenues, along with multiple examples of large seed manufacturers and distributors walking away from joint ventures and partnerships with Cibus for a variety of seed types and seed traits.
In 2019, Cibus made a shocking statement about its technology. While Cibus’ entire business model relied on its trait machine allowing for “precision gene editing”, Cibus claimed its SU Canola wasn’t actually gene-edited, rather the result of an accident in a laboratory petri dish. Shortly after, Cibus sold its SU Canola assets for a mere US$ 2 million.
Dr. John Fagan, a senior author for GMWatch, said “it is highly preposterous that a company that has invested tens of millions in developing a particular method of gene editing would turn around and claim that its first commercial product made using this gene-editing method was not actually the result of that method but happened accidentally via random mutagenesis.” GMWatch further commented “Assuming that Cibus’ claims about the canola being a product of random mutation are true, it would raise serious questions about whether it has misled investors… hope and speculation based on an unreliable and poorly controlled technology seems an unconvincing business model.”
A study from Greens/EFA found that “in cases where speed is important, gene editing is not the quickest or most reliable way to produce crops with desired traits. In contrast, conventional breeding has proven highly efficient and successful in producing such crops.”
1. Failed Product Launches and Failed Partnerships with Little/No Revenues: Cibus worked 20+ years to generate commercial interest for its technology. We found that Cibus had a history of failed commercialized products that failed to generate any meaningful revenues including canola, rice, corn, potato, wheat, flax, yeast, bacteria, and microorganisms. If Cibus’ technology was commercially viable, we expect any number of previous partnerships would have already licensed and implemented Cibus’ technology into their respective products, invest in, or possibly bid for Cibus itself.
2. Fierce Competition Already Exists for Canola Seed Pod Shatter Design Traits: In August 2022 Cibus guided for a possible 2025 release date for its canola pod shatter design to partners. Cibus’ pod shatter design already faces significant competition in 2024 from manufacturers and distributors such as Arcadia Bioscience, Bayer, BrettYoung, Brevant, Brightseed, Canterra, Moolsec, Pioneer, and Winfield.
3. US$ 250 Million Overpayment to Insiders for Assets: At the time of its 2023 reverse merger, Cibus’ technology was valued at US$ 750 million for goodwill and R&D intangible assets, yet unexpectedly in its first year as a public company Cibus wrote-down the carrying value of its intangible assets by US$ 250 million. If Cibus’ technology is so good, why did Cibus write-down 33% of the value of its R&D and trait pipeline within its first year as a public company?!?
4. Chairman Accused of Misleading Investors: Cibus’ Chairman and CEO Rory B. Riggs (“Riggs”) has a history being listed as a defendant in multiple lawsuits alleging insider trading, unjustly enrichment, misleading investors, and breaches of fiduciary duties. We think that Riggs is up to his old tricks of pumping Cibus stock. In addition to pledged CBUS shares for personal indebtedness, in March 2024, Riggs adopted a trading arrangement to sell up to 300,000 shares by July 12, 2024.
We think investors have been duped into believing a promotional management team about an over-hyped technology previously tried, tested, and failed by some of the world’s largest seed manufacturers and distributors to provide exit liquidity for early-stage Cibus investors. As of 1Q’24, Cibus burned ~US$ 5 million in cash per month and generated less than ~US$ 200,000 in monthly revenues. With less than ~US$ 24 million in cash as of March 31, 2024, we calculate that CBUS will need to either generate significant revenues or raise capital to satisfy ongoing operating expenses by September 2024.
With little/no revenues from its technology, we are short CBUS and think that its stock is going significantly lower towards “zero”.