Gevo, Inc. (NASDAQ:GEVO) has experienced an extraordinary turnaround in the last few days. This upturn in its fortune shortly after a dip in its share price which threatened to affect its listing on the NASDAQ began not long after Gevo officials agreed that they would take pay cuts, which including a reduction by 30% in pay for CEO Patrick Gruber while annulling the position of CFO. In this article, we analyze the company, the cause of this recent rise and what to expect going forward.
First, look at the stock’s price movement:
Matthew W. Peters, Frances Hamilton Arnold, and Peter Meinhold established Gevo, Inc. in June 2005 and its head office is located in Englewood, Colorado. The company produces renewable chemicals and next-generation biofuels and focuses on the developing and commercializing of alternative fuel products, which are based on isobutanol produced from renewable feedstocks. Its operations are carried out through the following divisions; Gevo, Gevo Development, and Agri-Energy. Its operational activities, which are related to the future production of isobutanol, include the production and sale of jet fuel, the development of self-developed biocatalysts, its Retrofit process and the next generation of chemicals and biofuels, which will be developed, based on isobutanol technology. The Agri-Energy and Gevo Development segments are currently responsible for the production of isobutanol, ethanol and related products as well as operating the Agri-Energy facility.
Just yesterday, Gevo Inc’s shares continued on the rise for a second straight day Tuesday, a continued benefit of the Environmental Protection Agency’s decision to increase the volume of biofuel which the company makes allowed to be mixed with gasoline for on-road use in cars. The share price was up by roughly 72% at the time, after an unprecedented 262% rise on Monday.
The ruling by EPA increased the permissible quantity of isobutanol, a biofuel which is produced from corn and other feedstocks, in use on the road to a 16% blend level from a former blend level of 12.5%. This approval was given in response to the request by Delaware-based Butamax Advanced Biofuels LLC, a joint venture between BP Plc DuPont
CEO of GEVO, Mr. Patrick Gruber explained that at Gevo has worked on developing the markets for isobutanol containing gasoline, particular to meet levels of demand for the ethanol free section of the market for gasoline. He added that this 16% blend level would increase demand in all markets while also providing Gevo’s partners and customers with an option for a much better product for use.
As Gevo specializes in the development, production, and sale of renewable technology and biofuels, including ethanol. According to the, company, the market for ethanol free gasoline is estimated to be at 5 billion gallons a year. This figure excludes RFG (reformulated gasoline) regions as well as those who are required to sell gasoline including an oxygenate, using information gotten from the Energy Information Administration.
Until very recently, ethanol was the only such gasoline oxygenate which was readily available for use. With RFG regions included, the market is projected to be at 7 billion gallons a year.
Just on Monday, the company’s shares soared by nearly 300%, also a benefit of the Environmental Protection Agency new regulations. A day after, the company reported that it had been issued a letter from Nasdaq which stated that company that it had regained compliance with the exchange’s minimum bid price continued listing requirement. This was issued in lieu of an earlier notice that it would be delisted from the exchange due to the drop in its bid price below the minimum requirement of $1.
The letter stated that as at June 18, the company recorded a closing bid price of its common stock well above the earlier mentioned $1 minimum requirement for at least ten consecutive trading days.
At the end of 2017, the firm recorded revenues of $27.5 million, a negligible rise of 1.1% from the revenues of the last year. Noticeably, this figure is the second lowest revenue recorded in the last four years, the highest figures of $30.1 million recorded two years earlier, and continuing trend of falling revenues for the company. However, it is anticipated that the market demand for its biofuel products will jump and boost sales revenues in the coming years.
However, the firm recorded cost of sales of $38.2 million, an insignificant increase from the previous year, but still higher than revenues recorder, just as in previous years. The may be a pointer that the company has been unable to improve its cost efficiency in the last few years.
The statement of financial position reveals that the firm is not too highly geared. On its books, its total debt is worth an estimated $25.3 million, leading to stable debt to equity ratio of 0.4. It also has a liquidity ratio of 1.59, which can be considered acceptable for its industry.
GEVO is evidence of what a suitable leadership team and a rightly positioned company can achieve for shareholders.
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Disclosure: We have no position in GEVO and have not been compensated for this article.