Palm oil is in almost everything, and it’s devastating rainforests. This Bill Gates-backed company used microbes to create an alternative
Shara Ticku and David Heller, co-founders of C16 Biosciences.
Photo courtesy C16 Biosciences.
In July 2013, Shara Ticku traveled to Singapore on a work trip for Goldman Sachs. The investment bank made her bring N95 masks to protect her from the terrible air quality at the time.
“I land in Singapore, and the air quality index is over 400. Air quality index: anything over 300 is considered super toxic. In New York right now, it’s probably in the 20s, and that’s for a big city,” Ticku told CNBC in a video interview on Tuesday. “They closed schools, they told pregnant women they can’t walk outside. It was crazy. And I had no clue what was going on.”
Ticku asked her local colleagues who informed her that neighboring countries Indonesia and Malaysia were burning rain forests to make palm oil. “By the way, we deal with this every year,” they told her.
That was the first time Ticku ever heard about palm oil but the experience would stick with her.
Ticku went on to work for in health issues, first at the Clinton Health Access Initiative, then at the fertility benefits management company Progyny, and then at the United Nations as the Secretary General’s Special Envoy for Health and Malaria.
Shara Ticku, co-founder and CEO of C16 Biosciences, holding their palm oil alternative, Palmless.
Photo courtesy C16 Biosciences.
She also went back to school and got her MBA at Harvard, where she met Harry McNamara, who was then getting his PhD in physics at Harvard and his PhD in health sciences and technology at Massachusetts Institute of Technology, and David Heller, who was studying biological sciences at the Massachusetts Institute of Technology. The three came together in a interdisciplinary class at the MIT Media Lab whose goal was for students to use their knowledge base to collaborate and solve a global challenge.
McNamara shared his experience of visiting Costa Rica with some friends to see the rainforest and seeing rows of systematically planted oil palms. When McNamara told Ticku and Heller about his experience, Ticku had a distinct feeling of déjà vu.
These experiences became the catalyst for the company that is now C16 Biosciences, which has raised $24 million from investors including Breakthrough Energy Ventures, the climate tech investing firm funded by Bill Gates.
On Thursday, C16 Biosciences is announcing the launch of Palmless, a palm oil alternative it’s invented and been able to produce at scale.
C16 Biosciences, named after the 16-carbon fatty acid that is of the primary components of palm oil and its microbial alternative, has produced 50,000 liters of its commercial-grade product. The company says it will begin appearing in beauty products next year, but declined to identify any of its customers.
What is palm oil and why is it a climate hazard?
Part of what makes palm oil so dangerous is its ubiquity: It’s found in more than half of the packaged products Americans use, including ice cream, lipstick, soaps and detergents, according to the World Wildlife Fund. It makes up 40 percent of traded vegetable oils, according to a paper published in CABI Agriculture and Bioscience, and the industry produces 81 million tonnes per year — almost as much as the next two largest vegetable oil crops, soybean and rapeseed, combined.
Palm oil grows best in the regions right around the equator, so palm oil producers chop down rainforest and clear that felled vegetation by burning it, making it a prime target of conservation organizations like the Rainforest Rescue and the World Wildlife Fund.
Palm oil trees grow at the Cikasungka palm oil plantation, operated by PT Perkebunan Nusantara VIII, in Bogor Regency in West Java, Indonesia, on Monday, June 20, 2022. Indonesia has slashed the maximum crude palm oil export levy by nearly half in another step to speed up shipments after lifting a temporary export ban on the commodity last month.
Bloomberg | Bloomberg | Getty Images
“It’s truly slashing and burning: Burn the trees, cut down the trees, and then they burn the peatlands that the trees sit on top of, which makes it a double whammy for carbon dioxide emissions because the trees hold carbon and the peatlands hold carbon,” Ticku said. Peatlands are marshy, boggy, wet land which are known to be tremendous carbon sinks.
Burning the forests also releases greenhouse gases, as does creating the fertilizer used by these plantations.
Palm oil plantations also affect biodiversity. The rainforest that gets cleared to make palm oil is home to endangered species including rhinos, elephants and tigers, according to the WWF. Clearcutting land in Borneo and Sumatra for palm oil agriculture is the greatest threat to orangutans, according to the Orangutan Foundation International.
A Forest was recently cleared up to plant oil palm trees in Rawa Singkil WIldlife reserve, on June 15, 2017 in Aceh, Indonesia. Global Forest Watch released the latest data showing that tree cover loss in Indonesia remains high and the acceleration can be largely attributed to massive expansion of oil palm plantations. Nearly half of the tree cover loss occurred in the Kalimantan region, where palm oil plantations have grown enormously since 2005 while in Sumatra, tree cover loss slowedbut only because the region no longer has accessible primary forest to cut.
Future Publishing | Future Publishing | Getty Images
“The thing about deforestation is nobody wants you to know that they’re doing it. People really try to hide it,” Ticku told CNBC. That makes it hard to track greenhouse gasses associated with palm oil production.
A 2018 analysis from the International Council on Clean Transportation estimated that land use changes in Indonesia and Malaysia emitted approximately 500 million tonnes of carbon dioxide equivalent each year. At the time, that was 1.4 percent of global net CO2 equivalent emission, which was almost as much as the aviation sector and more than the state of California emitted, the ICCT said.
Nonetheless, the industry continues to grow. The global palm oil market was valued at $63.7 billion in 2021 is expected to continue to grow to reach $98.9 billion in 2030, according to a report published in May from Grand View Research, a global market research firm.
That’s because palm oil is relatively inexpensive and “so damn good at what it does,” Ticku said. “Palm oil is used in most candies that have a chocolate coating, and it is truly the thing that is responsible for making chocolate melt in your mouth and not in your hand, because it’s got a melting profile that melts at body temp and not at room temperature.”
Environmental activists at ‘The Human Orangutan Conflict Response Unit – Orangutan Information Center’ (HOCRU – OIC) saves the Sumatran orangutan trapped in oil palm plantations on June 10, 2017 in North Sumatra, Indonesia, It is illegal to capture, kill, or keep orangutans as pets in Indonesia, prosecutions are rare and orangutan often meet this fate. Adult orangutan with her son is one of the ‘lucky’ that was saved by The Human Orangutan Conflict Response Unit – Orangutan Information Center (HOCRU – OIC) and taken to the forest Gunung Leuser National Park after being stuck on palm oil plantations. Sumatran orangutans (Pongo abelii) are a distinct species and listed as Endangered by the World Conservation Union (IUCN) on their Red List of Threatened Species. The Sumatran orangutan is considered the more immediately in danger of extinction, with only around 6,600 or so left in the wild today, and is therefore classified as Critically Endangered. The species is also listed on Appendix 1 of the Convention on International Trade in Endangered Species (CITES), under which animals smuggled out of their natural range country and confiscated should whenever possible be repatriated and returned to the wild.
Future Publishing | Future Publishing | Getty Images
Using yeast to solve the problem
When the C16 team was getting started in 2017, the idea of using biotechnology to make consumer products was relatively new, but Impossible Foods had just released its burger, which uses fermentation of yeast to make heme, the protein that makes a product taste meat-like.
“People began to really think long and hard about what what does it mean to consume and use products that were developed with biotechnology,” Heller told CNBC in an interview at C16 Biosciences’ company headquarters in Manhattan on Tuesday.
Investors are betting that customers are ready for those alternatives. “Consumers are increasingly more aware of the climate problem, which includes the deforestation involved in palm oil production, and are looking for ways they can contribute with their purchasing power,” Carmichael Roberts, one half of the investing committee for Gates’ climate investing firm, told CNBC.
To make its palm oil alternative, C16 Biosciences uses a wild type yeast microbe that makes a functional equivalent to palm oil with a kind of fermentation process. And fermentation — which is what has been used to make wine, beer and cheese for ages — is a “really, really robust, scalable process,” Heller said.
The firm was able to move so fast in part because microbes speed up research and development.
“We can design an experiment and start it and get a learning about whether that helped us produce better and more oil within about seven days,” Heller said. “It takes about one week from end to end.” By comparison, trying a new seed at a palm oil plantation takes more like seven years.
The C16 Biosciences labratory in Manhattan.
Photo courtesy: Cat Clifford, CNBC
Chemically, the palm oil that C16 Biosciences makes is not identical to the palm oil that is grown in industrial agriculture farms. However, “it contains the same fatty acids, which are the molecular fingerprints of fats and oils, that palm oil does,” Heller told CNBC. “And that’s a really important characteristic that allows our oil to function in the same kind of end products in the food and beauty and personal care space as palm oil does.”
While C16 Biosciences is launching in 2023 with beauty products, it’s not yet applied for approval from the United States Food and Drug Administration to be included in food products.
Right now, C16, with 35 employees and $24 million in total venture capital, is laser-focused on scaling up its palm oil alternative and simultaneously bringing the price down.
“But what we are building is a platform technology that can produce all different kinds of microbial oils,” Heller told CNBC. “So it’s definitely possible that we’re able to make other kinds of vegetable oil replacements in the future.”
Alex Karp, CEO of Palantir Technologies speaks during the Digital X event on September 07, 2021 in Cologne, Germany.
Andreas Rentz | Getty Images
Palantir shares continued their torrid run on Friday, soaring as much as 9% to a record, after the developer of software for the military announced plans to transfer its listing to the Nasdaq from the New York Stock Exchange.
The stock jumped past $64.50 in afternoon trading, lifting the company’s market cap to $147 billion. The shares are now up more than 50% since Palantir’s better-than-expected earnings report last week and have almost quadrupled in value this year.
Palantir said late Thursday that it expects to begin trading on the Nasdaq on Nov. 26, under its existing ticker symbol “PLTR.” While changing listing sites does nothing to alter a company’s fundamentals, board member Alexander Moore, a partner at venture firm 8VC, suggested in a post on X that the move could be a win for retail investors because “it will force” billions of dollars in purchases by exchange-traded funds.
“Everything we do is to reward and support our retail diamondhands following,” Moore wrote, referring to a term popularized in the crypto community for long-term believers.
Moore appears to have subsequently deleted his X account. His firm, 8VC, didn’t immediately respond to a request for comment.
Last Monday after market close, Palantir reported third-quarter earnings and revenue that topped estimates and issued a fourth-quarter forecast that was also ahead of Wall Street’s expectations. CEO Alex Karp wrote in the earnings release that the company “absolutely eviscerated this quarter,” driven by demand for artificial intelligence technologies.
U.S. government revenue increased 40% from a year earlier to $320 million, while U.S. commercial revenue rose 54% to $179 million. On the earnings call, the company highlighted a five-year contract to expand its Maven technology across the U.S. military. Palantir established Maven in 2017 to provide AI tools to the Department of Defense.
The post-earnings rally coincides with the period following last week’s presidential election. Palantir is seen as a potential beneficiary given the company’s ties to the Trump camp. Co-founder and Chairman Peter Thiel was a major booster of Donald Trump’s first victorious campaign, though he had a public falling out with Trump in the ensuing years.
When asked in June about his position on the 2024 election, Thiel said, “If you hold a gun to my head I’ll vote for Trump.”
Thiel’s Palantir holdings have increased in value by about $3.2 billion since the earnings report and $2 billion since the election.
In September, S&P Global announced Palantir would join the S&P 500 stock index.
Analysts at Argus Research say the rally has pushed the stock too high given the current financials and growth projections. The analysts still have a long-term buy rating on the stock and said in a report last week that the company had a “stellar” quarter, but they downgraded their 12-month recommendation to a hold.
The stock “may be getting ahead of what the company fundamentals can support,” the analysts wrote.
Charles Liang, chief executive officer of Super Micro Computer Inc., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024. The trade show runs through June 7.
Annabelle Chih | Bloomberg | Getty Images
Super Micro Computer could be headed down a path to getting kicked off the Nasdaq as soon as Monday.
That’s the potential fate for the server company if it fails to file a viable plan for becoming compliant with Nasdaq regulations. Super Micro is late in filing its 2024 year-end report with the SEC, and has yet to replace its accounting firm. Many investors were expecting clarity from Super Micro when the company reported preliminary quarterly results last week. But they didn’t get it.
The primary component of that plan is how and when Super Micro will file its 2024 year-end report with the Securities and Exchange Commission, and why it was late. That report is something many expected would be filed alongside the company’s June fourth-quarter earnings but was not.
The Nasdaq delisting process represents a crossroads for Super Micro, which has been one of the primary beneficiaries of the artificial intelligence boom due to its longstanding relationship with Nvidia and surging demand for the chipmaker’s graphics processing units.
The one-time AI darling is reeling after a stretch of bad news. After Super Micro failed to file its annual report over the summer, activist short seller Hindenburg Research targeted the company in August, alleging accounting fraud and export control issues. The company’s auditor, Ernst & Young, stepped down in October, and Super Micro said last week that it was still trying to find a new one.
The stock is getting hammered. After the shares soared more than 14-fold from the end of 2022 to their peak in March of this year, they’ve since plummeted by 85%. Super Micro’s stock is now equal to where it was trading in May 2022, after falling another 11% on Thursday.
Getting delisted from the Nasdaq could be next if Super Micro doesn’t file a compliance plan by the Monday deadline or if the exchange rejects the company’s submission. Super Micro could also get an extension from the Nasdaq, giving it months to come into compliance. The company said Thursday that it would provide a plan to the Nasdaq in time.
A spokesperson told CNBC the company “intends to take all necessary steps to achieve compliance with the Nasdaq continued listing requirements as soon as possible.”
While the delisting issue mainly affects the stock, it could also hurt Super Micro’s reputation and standing with its customers, who may prefer to simply avoid the drama and buy AI servers from rivals such as Dell or HPE.
“Given that Super Micro’s accounting concerns have become more acute since Super Micro’s quarter ended, its weakness could ultimately benefit Dell more in the coming quarter,” Bernstein analyst Toni Sacconaghi wrote in a note this week.
A representative for the Nasdaq said the exchange doesn’t comment on the delisting process for individual companies, but the rules suggest the process could take about a year before a final decision.
A plan of compliance
The Nasdaq warned Super Micro on Sept. 17 that it was at risk of being delisted. That gave the company 60 days to submit a plan of compliance to the exchange, and because the deadline falls on a Sunday, the effective date for the submission is Monday.
If Super Micro’s plan is acceptable to Nasdaq staff, the company is eligible for an extension of up to 180 days to file its year-end report. The Nasdaq wants to see if Super Micro’s board of directors has investigated the company’s accounting problem, what the exact reason for the late filing was and a timeline of actions taken by the board.
The Nasdaq says it looks at several factors when evaluating a plan of compliance, including the reasons for the late filing, upcoming corporate events, the overall financial status of the company and the likelihood of a company filing an audited report within 180 days. The review can also look at information provided by outside auditors, the SEC or other regulators.
Last week, Super Micro said it was doing everything it could to remain listed on the Nasdaq, and said a special committee of its board had investigated and found no wrongdoing. Super Micro CEO Charles Liang said the company would receive the board committee’s report as soon as last week. A company spokesperson didn’t respond when asked by CNBC if that report had been received.
If the Nasdaq rejects Super Micro’s compliance plan, the company can request a hearing from the exchange’s Hearings Panel to review the decision. Super Micro won’t be immediately kicked off the exchange – the hearing panel request starts a 15-day stay for delisting, and the panel can decide to extend the deadline for up to 180 days.
If the panel rejects that request or if Super Micro gets an extension and fails to file the updated financials, the company can still appeal the decision to another Nasdaq body called the Listing Council, which can grant an exception.
Ultimately, the Nasdaq says the extensions have a limit: 360 days from when the company’s first late filing was due.
A poor track record
There’s one factor at play that could hurt Super Micro’s chances of an extension. The exchange considers whether the company has any history of being out of compliance with SEC regulations.
Between 2015 and 2017, Super Micro misstated financials and published key filings late, according to the SEC. It was delisted from the Nasdaq in 2017 and was relisted two years later.
Super Micro “might have a more difficult time obtaining extensions as the Nasdaq’s literature indicates it will in part ‘consider the company’s specific circumstances, including the company’s past compliance history’ when determining whether an extension is warranted,” Wedbush analyst Matt Bryson wrote in a note earlier this month. He has a neutral rating on the stock.
History also reveals just how long the delisting process can take.
Charles Liang, chief executive officer of Super Micro Computer Inc., right, and Jensen Huang, co-founder and chief executive officer of Nvidia Corp., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024.
Annabelle Chih | Bloomberg | Getty Images
Super Micro missed an annual report filing deadline in June 2017, got an extension to December and finally got a hearing in May 2018, which gave it another extension to August of that year. It was only when it missed that deadline that the stock was delisted.
In the short term, the bigger worry for Super Micro is whether customers and suppliers start to bail.
Aside from the compliance problems, Super Micro is a fast-growing company making one of the most in-demand products in the technology industry. Sales more than doubled last year to nearly $15 billion, according to unaudited financial reports, and the company has ample cash on its balance sheet, analysts say. Wall Street is expecting even more growth to about $25 billion in sales in its fiscal 2025, according to FactSet.
Super Micro said last week that the filing delay has “had a bit of an impact to orders.” In its unaudited September quarter results reported last week, the company showed growth that was slower than Wall Street expected. It also provided light guidance.
The company said one reason for its weak results was that it hadn’t yet obtained enough supply of Nvidia’s next-generation chip, called Blackwell, raising questions about Super Micro’s relationship with its most important supplier.
“We don’t believe that Super Micro’s issues are a big deal for Nvidia, although it could move some sales around in the near term from one quarter to the next as customers direct orders toward Dell and others,” wrote Melius Research analyst Ben Reitzes in a note this week.
Super Micro’s head of corporate development, Michael Staiger, told investors on a call last week that “we’ve spoken to Nvidia and they’ve confirmed they’ve made no changes to allocations. We maintain a strong relationship with them.”
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