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Loop Industries' Problems Are More Than Plastic

Dec. 07, 2018 7:00 AM ETLoop Industries, Inc. (LOOP)22 Comments
Aaron Chow profile picture
Aaron Chow


  • Loop Industries claims to “utilize its proprietary recycling technology to recycle all elements…as well as all additional shipping components,” despite management privately admitting that it sends LDPE to traditional recyclers.
  • Loop raised $15.7 million between Q1 and Q4 2018 on twisted language that suggests the company’s recycled plastic is FDA-approved. Recycling trade websites, including corporate partners, have perpetuated this language.
  • Loop claims that its chemical recycling process is proprietary; my analysis suggests that Generation II depolymerization doesn’t fall under the company’s patent; management purports that those patents are pending.
  • The company has not reported production or recovery rates yet plans on building a second recycling plant. Cash burn leaves a little more than a quarter before necessary capital raise.
  • Loop’s CEO tried the same business model at Dragon Polymer. Barron’s and the WSJ reported that LOOP’s second-largest investor leaked revenue numbers at iMergent. Loop's CFO just resigned.

(Editor's Note: Seeking Alpha wishes to note to readers the following edits that were made to the article in the days following publication: 1) The author corrected the description of the fundraising time periods discussed, and made a clarification regarding the $ amounts raised during the period. 2) The author acknowledges Loop Industries' disagreement with his opinions regarding the importance of 'FDA No Objection Letter' or pre-approval, as stated in "Loop disagrees...". 3) The author made a correction to state that Donald Danks is not a current member of Loop's Board of Directors.)

Straight to The Point

Loop Industries (NASDAQ:NASDAQ:LOOP) raised $15.7 million between May 4, 2017 (Q1 2018) and February 28, 2018 (Q4 2018) from investors on the premise that the company is “a leader in sustainably produced polyethylene terephthalate” (Source: Loop Industries). This positioning is based on four key claims that I believe, based on my research, are untrue:

  1. That LOOP “utilize[s] its proprietary recycling technology to recycle all elements…as well as all additional shipping components (bags and gaylord boxes)” (Source: 2017 Service Agreement)
  2. That LOOP’s recycled plastic is “high quality FDA-approved food-grade plastic” (Source: Loop Industries Q&A). The company has since changed the language on its website. I time-stamped and screenshotted the company’s previous language, which I include below.
  3. That LOOP “successfully activated the next generation of their waste PET and polyester fiber upcycling technology which now allows for the continuous production of Loop™ PET products” (Source: Loop Industries June 21, 2018 Press Release).
  4. That LOOP’s “proprietary technology breaks down PET into its base chemicals, Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG), at a recovery rate of over 90% and under normal atmospheric pressure and at room temperature” (Source: LOOP 2017 Second Quarter 10-Q).

As part of my research, I tried to contact the company

This article was written by

Aaron Chow profile picture
My name is Aaron Chow. I am a long/short investor who manages his family's money and separately-managed accounts.

Analyst’s Disclosure: I am/we are short LOOP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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