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There's been a lot of controversy about JBI Inc. (OTCPK:JBII). Some hate it, some love it...there doesn't seem to be any middle ground. And if you visit the stock message boards, that becomes abundantly clear. The night and day polarity is baffling.

JBI claims the ability to convert waste plastic into end-user fuels at a prodigious rate using a catalyst and a process called pyrolysis. Detractors say their claims are invalid and P2O doesn't work.

The company went public in April 2009 when the CEO, John Bordynuik, bought 40M shares (64% of the OS) of 310 Holdings Inc. At that time Mr. Bordynuik, a collaborative researcher for MIT (Bloomberg Bio), owned a legacy computer tape recovery company that NASA had sole-sourced (NASA Document) to recover data from their old satellite tapes. This company was immediately merged into the public company. Mr. Bordynuik then started developing his Plastic2Oil (P2O) process using a catalyst he had found on one of the many old tapes he had purchased from various universities.

The company has been able to validate Plastic2Oil using independent labs. They have also obtained a commercial production permit from the NY Department of Environmental Control.

As far as actually being able to produce fuel and sell it, they entered into a 10 year contract with Rock-Tenn (NYSE:RKT) to process their plastic waste, and are selling fuel to a number of customers, one of them being Oxy Vinyl Canada, a subsidiary of Occidental Petroleum (OXY).

It's been a long and winding road for JBI Inc, and that road has recently turned rocky.

In July, 2011 the SEC issued a Wells Notice alleging an asset misstatement of $10M worth of media credits in 2009. Negotiations for settlement between the company and the SEC failed to bear fruit (JBII Response), and on January 4, 2012, the SEC filed a claim alleging fraud. The stock plunged from 2.35 to a low of .52, but has since recovered to $1.25. (1-26-12).

While these SEC actions are troubling, the jury is still out on the final disposition. Alleging fraud for a misstatement of assets seems like a reach.

The share structure has been relatively stable. At company inception it was 64M OS, and now stands at 72M. That's an 8M increase in 3 years.

Risk/Reward Ratio

It's not easy assessing the R/R ratio for a new company like this. On the one hand they have brought to market breakthrough technology. On the other, the CEO is facing SEC actions.

This company could be on the verge of significant gains. The CEO's credentials are impressive (CEO Bio). Their technology appears to be sound, and converting a never-ending stream of zero cost waste plastic into a valuable commodity is a business model most other companies can only dream about.

Shareholder loyalty is strong, considering the attendance at their first Annual General Meeting: 450 shareholders. This bodes well for long term reward.

Short term risk is mitigated by the share price seeming to have absorbed the effect of the SEC actions. The prospects for long term gain seem to outweigh the risk.

Bottom line: Strong buy for long term gains.

Source: John Bordynuik's Plastic2Oil: A Long And Winding Road