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Energy Vault Has Lawsuit Problem To Go Along With Bad Physics, CO2 Debt, & Stock Price Drop

There’s a lot of excellent work going on in cleantech, and there are a lot of good investments. But there are also a lot of people attempting to cash in without moving the climate action needle forward. Caveat emptor.

It appears as if Energy Vault has challenges in addition to its ineffective, expensive, carbon-debt laden, mechanical failure of an electricity storage solution.

A legal firm, Hittelman Strunk, has filed a class action lawsuit on behalf of investors due to an alleged stock price inflation scheme. Per the announcement, Energy Vault paid a million dollars to DG Fuels, and in return DG Fuels agreed to buy $520 million worth of Energy Vault products. The lawsuit asserts that DG Fuels has no revenue and has nothing in operation at present, and that this was not disclosed to investors. This would constitute a violation of securities laws in the US, per the announcement.

DG Fuels is an existing entity that is promising to build sustainable ground or aviation fuels manufacturing facilities with a minor extension of the standard Fischer–Tropsch process and seeking DOE loan guarantees, with the initial facility proposed for Louisiana. Per LinkedIn, it has only two executives, three advisory board members, and no other employees at present. Its website shows more people — 4 executives and 15 members of the advisory board, a not unusual condition for an early stage company. Its LinkedIn profile suggests they are going to turn old railway ties into diesel fuel, while their website indicates jet fuel.

I had ignored Energy Vault for a couple of years, as a quick initial glance had it coated in so many red flags that it was clearly doomed to failure. However, due to my publications on low-carbon transformation, including end game challenges such as grid storage, aviation refueling, and marine refueling, people kept bugging me about it. Then Energy Vault secured a reverse-takeover special purpose acquisition company (SPAC) deal that got it onto the stock market at around $2.9 billion, subsequently dropping to $1.9 billion.

The combination led me to analyze the technology in its initial incarnation — deeply absurd — and its purported later incarnation — imagine a massive 25-story heavy steel building hoisting multi-ton blocks up to the top couple of floors and not collapsing under the weight of its hubris — and to publish a couple of articles. I then went back to ignoring it, at least until someone pointed this lawsuit out to me.

The headline of my second article was Energy Vault Claims Highlight The Lack Of Due Diligence In Cleantech SPACs. Prescient? No, my assertion was that the lack of technical viability and massive carbon debt of the storage technology were the problems, and that that was where due diligence failed. I had no insights into claims that it made to investors about projected revenues.

And to be clear, I have no knowledge of DG Fuels or Energy Vault beyond what is publicly available on the internet. I don’t know if the claims made in the lawsuit are accurate. I don’t have any insight into funding that DG Fuels may have. It’s entirely possible that they have a bunch of employees who just don’t use LinkedIn, although that’s unusual for tech companies in my experience. I don’t know the principals. The lawsuit is currently just that, a suit which has been raised.

That said, SPACs are the 2020 version of IPOs and ICOs. I also looked at the absurd market capitalization of electric vertical takeoff and landing air taxi firms, and their amazing loss of market capitalization — then $16 billion, now $21 billion or 75% –, and saw the same pattern. Lilium, one of those firms, is also targeted with a class action lawsuit related to non-disclosure of critical information after Iceberg Research dropped a report on the deficiencies.

In that space, the SPAC founders — money people who put investments into a company with no purpose except to do a reverse takeover of some willing startup with much less due diligence — were taking larger and larger bites of the money raised. As I pointed out, the publicly available information indicates Energy Vault was left with only a couple of hundred million of the raised money. Others will remember Nikola, another SPAC venture, and its $125 million securities fraud payout.

There’s a lot of excellent work going on in cleantech, and there are a lot of good investments. But there are also a lot of people attempting to cash in without moving the climate action needle forward. Caveat emptor.

 

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Written By

is Board Observer and Strategist for Agora Energy Technologies a CO2-based redox flow startup, a member of the Advisory Board of ELECTRON Aviation an electric aviation startup, Chief Strategist at TFIE Strategy and co-founder of distnc technologies. He spends his time projecting scenarios for decarbonization 40-80 years into the future, and assisting executives, Boards and investors to pick wisely today. Whether it's refueling aviation, grid storage, vehicle-to-grid, or hydrogen demand, his work is based on fundamentals of physics, economics and human nature, and informed by the decarbonization requirements and innovations of multiple domains. His leadership positions in North America, Asia and Latin America enhanced his global point of view. He publishes regularly in multiple outlets on innovation, business, technology and policy. He is available for Board, strategy advisor and speaking engagements.

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