Italy’s Unicorn Stumbles as Fund Report Leads to Founder Arrest

(Bloomberg) -- Bio-On SpA was a rare unicorn on the Italian stock exchange as the bio-plastic company rose to a market valuation of over 1 billion euros ($1.1 billion) just a couple of months ago. Now it’s become a nightmare for investors.

Bio-On has plunged more than 80% since the company was targeted by short seller Quintessential Capital Management in July. The stock was suspended Wednesday after its founder was arrested by the Italian finance police.

Chairman Marco Astorri and two other executives are subject to precautionary measures related to a probe for alleged false accounting and market manipulation, according to a police official in Bologna. Authorities also seized 150 million euros in assets.

“Our investigation started after false communications following the report by the U.S. fund,” Bologna prosecutor Giuseppe Amato said at a press conference. “The company’s activities were not in line with the communication sent to investors, which helped it to become a unicorn with a market capitalization of over 1 billion euros.”

An external spokeswoman for Bio-On didn’t comment. The company reiterated earlier this month that it acted correctly in managing the business. Attorneys for Astorri said they would make a filing in a Milan court defending the actions of the chairman and corporate bodies, news agency Ansa reported.

Before being suspended Wednesday by the Italian stock exchange, Bio-On was indicated down 50% in pre-market trading to 5.21 euros, which would give the company a market value of less than 100 million euros.

In July, Quintessential Capital raised concerns over sales and technology of Bio-On in a report, saying that the “vast majority or perhaps all of the revenues and receivables” of the bio-plastic producer stem from shell companies linked to the parent firm. It also said that the value of its technology to produce bio-plastics is questionable.

READ: Short Seller Questions Credibility of Italian Bio-Plastic Maker

Three measures against individuals were taken as part of the Bio-On investigation dubbed “Plastic Bubbles,” according to the police statement.

Quintessential wrote “Bio-OFF” in a tweet following the finance police’s operation.

--With assistance from Sonia Sirletti and Alessandro Speciale.

To contact the reporters on this story: Chiara Remondini in Milan at cremondini@bloomberg.net;Tommaso Ebhardt in Milan at tebhardt@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Dan Liefgreen

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