Loop Industries Stock Jumps 30% on SK Global Chemical Investment

Shares of Loop Industries (NASDAQ: LOOP) have jumped on Wednesday following news that SK global chemical is taking a 10% stake in the small cap plastic and polyester materials company. SK global chemical is part of South Korea’s SK Group, a massive conglomerate that operates across a plethora of industries from telecommunications to semiconductors to petroleum, among others.

Loop shares have jumped as much as 32% today. As of 11:45 p.m. EDT, the stock had given back some of those gains but was still up 22%.

What investors need to know about SK global’s investment

SK global chemical has agreed to purchase 4.7 newly issued Loop shares at $12 per share, translating into a total equity investment of approximately $56.5 million. SK global chemical will also get a seat on Loop’s board of directors to help provide input regarding strategic direction and Loop’s global commercialization strategy, the companies said.

As part of the strategic partnership, Loop has also granted SK global chemical options to purchase roughly 461,000 more shares at a price of $11 per share within the next year, 4.7 million shares at $15 per share within the next three years, and yet another 2.4 million shares at $20 per share once the company constructs its first Asian manufacturing facility.

The cash will be used to help fund the construction of a new manufacturing facility at a site that Loop recently acquired in Quebec.

“SK global chemical is an ideal strategic partner to accelerate the growth of our company and the global commercialization of our technology,” Loop CEO Daniel Solomita said in a statement. “Its scale and sophistication, its global chemicals manufacturing footprint and a shared vision to create value through sustainability and innovation make them a valued partner in our journey to bring our technology to market.”

Forming a joint venture

The two companies plan to form a joint venture (JV) that includes exclusivity provisions. The JV will construct a sustainable polyethylene terephthalate (PET) plastic and polyester fiber factories throughout Asia. SK global chemical will hold a majority 51% stake in the JV, with Loop owning the remaining 49%. 

Loop’s proprietary materials technology, which helps break down PET plastic and polyester fibers that have historically been unrecyclable, is patented. Accordingly, Loop will receive recurring annual royalty fees based on a percentage of revenue generated from each facility.

The first facility is scheduled to be opened in South Korea in the first half of 2022, with another three facilities built by 2030. The companies estimate that the factories will be able to consume up to 400,000 tons of PET plastic and polyester fiber waste, which should reduce carbon dioxide emissions by approximately 632,000 metric tons once all four plants are fully operational. That’s roughly equivalent to the emissions of burning 270 liters of gasoline.

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