An Innovation Lie...

TCS Daily ^ | 8/29/2006 | Dominic Basulto

[Jane2005]

On August 7, Sharesleuth.com, the investigative journalism venture launched earlier this year by billionaire bad boy Mark Cuban, claimed its first victim: Xethanol. Apparently, Xethanol was going around telling investors that its alternative fuel solution had the potential to become a game-changing innovation for the energy sector. Jumping on Wall Street's ethanol bandwagon, the company claimed that it was able to turn wood chips, corn stalks and paper sludge into cheap alternative fuel. However, Xethanol's claims turned out to be nothing more than an elaborate innovation hoax, proving that it's best to do your homework before investing in overheated, speculative markets such as the one for ethanol companies.

An extensive Sharesleuth.com investigation found no evidence that Xethanol had produced significant quantities of ethanol from any raw materials. In fact, one of the company's two ethanol-producing plants turned out to be inactive and shuttered for more than a year. Moreover, Xethanol's claim that it would become one of the first companies to commercialize ethanol technology ("a sort of Holy Grail in the renewable-energy world") turned out to be false as well. Xethanol actually spends little or nothing on R&D and has a "glaring absence" of scientists on its staff, introducing tremendous uncertainty about the company's long-term innovation potential.