2012-03-08 / The Motley Fool

My Smartest Investment

Empty Shell

EarthShell made biodegradable plates, bowls, etc., for the fast-food industry and others. Its products were used by some of our national parks and McDonald’s, not to mention numerous colleges. It won awards for being environmentally sound. But … as a company it has been a flop for me, costing me thousands of dollars. It was a recommendation from a good friend and seemed like a very good product, so I was baffled by its poor performance. Then again, I didn’t know much about the company. It was a purchase I made in my pre-Fool days.

— K. M., online The Fool Responds: It’s never enough to just have a terrific product. Sometimes competitors can easily copy it. And even if they can’t, the product might not catch on as expected. A company can also burn through too much cash before turning the corner into profitability. EarthShell lost $331 million over 14 years before filing for bankruptcy protection in 2007. When it filed, it listed $16,176 in assets and $11.9 million in debt, and its stock was trading for pennies per share. ¦

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