KiOR: The Inside True Story of a Company Gone Wrong. Part 4, the Year of Living Disingenuously

O’Connor bails on the stock

Following the failure of his numerous strikes at salvaging KiOR’s technology, frustrated with what the State of Mississippi alleged to be “obstacles to his technology audit, ”co-founder and director Paul O’Connor started to bail. He resigned as a director in May 2012, and started to unload shares. Fast.

Although other directors and officers were selling shares in 2012, no single KiOR insider besides directors Ralph Alexander or O’Connor sold more than 20,000 shares during the year. Alexander unloaded more than 50,000 shares, hauling in more than $400,000. O’Connor, who held 12 million shares with a market cap of more than $100 million at the beginning of the year, started to sell in large chunks. Nothing before he attempted to rouse the KiOR management and board on three occasions. But he unloaded more than 834,554 shares at $8.84 on May 23rd, and 430,000 more shares before the end of the year, at least, in a $5.92 to $7.08 range.

He may have sold far more. In a May 23rd filing he reported holding more than 12 million shares, but in his October 31 filing, he reported holding 1.958 million. There’s no direct report of a further sale.

“Recklessness and misleading conclusions”

In August 2012, the state of Mississippi alleged recklessness in the financial modeling. The state said, in its lawsuit against KiOR:

“Max Kricorian emailed the corporate financial model to the Company’s executive leadership team and asked that they sign off on the [assumptions] within it. The recipients included John Kasbaum, John Hacskaylo, Ed Smith, John Karnes, Chris Artzer and Fred Cannon. The entire executive leadership team signed off on the key assumptions, despite the recklessness and misleading conclusions to which they led.”

The Sunny Q2 earnings statement

On August 14th, Kior announced a $23 million net loss for the quarter, but Cannon stated:

“We are proceeding on schedule with the commissioning of our Columbus facility and are on track to start the facility up next month. With startup in September, we anticipate that the Columbus facility will be providing America’s first truly sustainable cellulosic gasoline and diesel for American vehicles in the fourth quarter. Also, we expect that the final construction costs for the Columbus facility will be about four percent under our latest cost estimate.”

“In addition to the progress at the Columbus facility, our research and development efforts have generated major advances to our proprietary biomass-to-fuels technology. Once implemented, we believe that these improvements should allow us to increase our nameplate capacity up to 20 percent and significantly decrease the capital intensity of our facilities.”