Enerkem abandons advanced biofuels IPO

April 27, 2012 |

In Canada, Enerkem has abandoned plans for its NASDAQ IPO. In a filing yesterday with the SEC, the company wrote: “In light of current market conditions, the Company has determined not to proceed with the initial public offering contemplated by the Registration Statement.”

It was less than 90 days since the company filed its F-1 registration statement for a proposed $125 million initial public offering, but the offer had been reportedly in trouble, unable to fill out the order book, for several weeks in April during which the IPO pricing week was rescheduled twice. The lead book-running managers for the offering were Goldman Sachs, Credit Suisse and BMO Capital Markets.

Enerkem, which in the first three quarters of 2011 lost $19.1 million while recording $887K in revenues (primarily government grants) had become the 15th company to file for an IPO in the industrial biotech boom when its F-1 was filed in Febriary.

At the time of the filing, the Digest wrote: “As essentially pre-revenue companies go, here’s a gem. The right partners, a low-cost, locked-in, always available, non-commodity feedstock. The upstream is gold. Downstream? Who better than Valero, which has been turning its own ethane production and distribution arm into a corporate shining star.” But we cautioned, “All of which brings us to the midstream. There are only three concerns, but they are, how do we put it, items to watch and note:

“First, like so many others who have come to market in this IPO wave, Enerkem has not completed a commercial scale facility – so there is what is becoming “the usual” scale-up risk. In Enerkem’s case, it’s a 7X scale-up, far less than many others who have made it across the IPO chasm.

“Second, bringing down the costs. Enerkem emphasizes its ability to manage down the operating costs – , absent an execution at scale, that will have to be taken on faith. Again, a common feature of the IPOs in this sector.

“The third? Yikes, Enerkem hasn’t made ethanol yet at its demonstration plant. Now, methanol to ethanol is not exactly rocket science – the catalysts and technology have been around for some time. But, there it is – they haven’t made a drop of the intended product at the Westbury plant.”

It is not clear which of these, or other factors, caused an elevated level of concern, or whether the lackluster post-IPO performance of industrial biotech stocks like AMRS, CDXS or GEVO doomed the effort from the start.

Meanwhile, Enerkem has not yet released a statement on how it will revise its capitalization plans.

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