Since jumping from the bulletin boards to the Nasdaq Capital Market last month, shares of Cereplast Inc. have been on a roller coaster, despite a spate of good news.
The El Segundo maker of bio-based plastics has announced several distribution agreements, a smaller first-quarter loss and steady progress in expanding raw material sources for environmentally friendly plastics.
But its shares, which closed at $3.50 on May 27, are down nearly one-third from its April 12 Nasdaq debut.
Chief Executive Frederic Scheer, a company founder who has been in the biodegradable plastics industry since the mid-1990s, shrugs at the volatility. He helped engineer a 1-for-40 reverse stock split to reduce the number of shares to qualify it for Nasdaq listing.
“This is a very exciting time for us but also volatile,” Scheer said. “When you move from a 10-cent stock to a $5 stock you’re going to lose some investors, and I think there’s also been some shorting going on. But our prospects are great.”
Among the major news involving the company was the Securities and Exchange Commission’s approval May 26 of a shelf registration to sell up to $25 million shares of common stock over the next several months.
The company used an earlier $2.23 million private placement to help relocate its manufacturing from California to Indiana, closer to the corn, wheat and potatoes that form the base for its plastic resins, used to create everything from compostable cups to baby booster seats
Last week, Cereplast announced a North American distribution agreement with subsidiary of Ashland Inc., a global specialty chemicals company based in Covington, Ky. Ashland will distribute both Cereplast’s compostable plastics and its more durable hybrids resins line.
Earlier this month, Cereplast announced a deal with Kuala Lumpur-based CRS Technologies Sdn. Bhd. that will enable CRS to supply bio-based plastic coatings to manufacturing customers throughout Malaysia. In addition, Brazilian partner Bunge Alimentaris said it will expand its use of Cereplast resins in its compostable food packaging products for the Brazilian market.
Despite its out-of-state expansion, Cereplast intends to keep its headquarters in Los Angeles County, and has settled down in El Segundo after moving from Hawthorne.
“The market is really beginning to boil,” Scheer said. “The market for bio-plastics is beginning to grow again, and we think the Nasdaq listing has given us added credibility.”
Meanwhile, Cereplast is developing a new family of algae-based resins and said in April that it is on track to have the products ready for commercial use by the end of the year.
Wall Street is starting to take notice.
“Although (Cereplast) faces challenges regarding financing and product acceptance, we believe its strong management team, solid product portfolio and valuable technology will eventually carry the day,” said Harbinger Research analyst Brian Connell, who initiated coverage last month with a “strong speculative buy” rating on shares.
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