Are IPOs good for early-stage companies and advanced biofuels?

July 13, 2012 |

$104 million Elevance private financing round larger than last two IPOs; puts IPOs in focus; do the benefits outweigh the costs?

Do advanced biofuels companies really need to be “thinking IPO”, industry leaders were asking this week after Elevance Renewable Sciences announced that it has raised $104 million in its Series E financing round.

Lacustrine Limited via Genting Genomics Limited, wholly owned by Genting Berhad, based in Kuala Lumpur, Malaysia led the round with Total Energy Ventures International, based in Paris, France also participating in the financing.  Elevance also announced that Tan Sri Lim Kok Thay, Chairman and Chief Executive of Genting Berhad, will join the Elevance board of directors.

Elevance produces high performance ingredients for use in personal care products, detergents, lubricants and other specialty chemicals and fuel markets from renewable feedstocks.

Reaction from Elevance

“The investment will support Elevance’s strategic growth plans, including the continued development of biorefineries in Asia and North and South America,” said K’Lynne Johnson, CEO of Elevance. “The addition of the Genting Group via Lacustrine Limited, compliments the strengths of our existing investors and further emphasizes the key potential that Malaysia and Asia play in our global footprint.”

Are early IPOs necessary?

The Yes view.

In addition to the IPO event itself, IPOs enable companies to tap the broad and liquid public finance channel for follow-on equity raises that enable construction of first- and second-commercial plants- and allow the company to tap the bond market at sharply reduced rates compared to the rates enjoyed by private companies.

Recent public raises

Earlier this month, Gevo announced that it has agreed to sell 12.5M shares of its common stock at $4.95 per share. The gross proceeds to the Company from this offering are expected to be $61.87M. The Company also announced the pricing of its public offering of $40M aggregate principal amount of 7.5% convertible senior notes due 2022.

Last week, Pacific Ethanol announced it has closed its previously announced underwritten public offering of 28.0 million units at a public offering price of $0.43 per unit, for gross offering proceeds of $12.0 million. The warrants are exercisable immediately.

In February, Amyris completed a $58.7 million private placement of its common stock and placed $25 million in 3% senior unsecured notes due in 2017. The purchase and sale price for the shares was $5.78 per share.

The No view.

Industrial biotechnology companies should not be in the IPO markets until they have completed their first commercial plants; the value of their technology can be fairly assessed in dollar terms, and the company is generating meaningful revenues and is on a firm path to profitability.

In addition, premature IPOs cause confidence losses for the companies and the sector as a whole when shares do not hold up well in the secondary market – and industrial biotech stocks have taken a drubbing there. Early IPOs cause companies to “go quiet” and lose visibility in their run-up to IPOs – visibility that is critical to their capital and human capital aggregation. Finally, private placements and venture rounds still offer, for those companies that can access strategic investors, attractive pools of capital that, in many cases, exceed those pools raised in IPOs.

Recent private raises

In April, Sapphire Energy announced that it has secured the final tranche of a $144 million Series C investment funding. The Series C backers include Arrowpoint Partners, Monsanto, and other undisclosed investors.  All major Series B investors have participated.

Last month, Myriant announced that it closed a $25 million private bond placement for the construction of its flagship commercial bio-succinic acid plant located in Lake Providence, Louisiana.

In May, EdeniQ announced it has raised over $30 million in additional capital in the form of both an equity investment and a debt facility. The equity investment was led by both existing investors, including Kleiner Perkins Caufield & Byers, Draper Fisher Jurvetson, Cyrus Capital, The Westly Group, Angeleno Group, I2BF Global Ventures and Element Partners as well as a new investor, Flint Hills Resources Renewables LLC.

In March, Virdia announced $30 million in its latest round of financing, raising over $20 million from insiders, Khosla Ventures, Burrill & Company and Tamar Ventures. In addition, the company closed a $10 million in a venture debt deal with Triple Point Capital.

In February, BioAmber raised $30 million in its Series C round of financing with $20 million invested in November by Naxos Capital, Sofinnova Partners, Mitsui & Co. Ltd. and the Cliffton Group, and a second tranche of $10 million on February 6th, 2012 closed with specialty chemicals company LANXESS.

In January, LanzaTech announced that it has closed its Series C round with new investment totaling US $55.8 million led by the Malaysian Life Sciences Capital Fund. New investors include the venture arm of Petronas, the national oil company of Malaysia, and Dialog Group, a Malaysian technical services provider to the oil, gas and petrochemical industry.

In January, BASF announced plans to invest $30 million in the US technology firm Renmatix, as part of a new $50 million Series C investment round announced by Renmatix.

Five recent IPO raises

Ceres, $65M
REG, $72M
KiOR, $150M
Gevo, $123.3M
Solazyme, $227M

Abandoned IPOs

Enerkem
Luca Technologies

Still in the IPO queue

Elevance Renewable Sciences
BioAmber
Parabel
Fulcrum Bioenergy
Genomatica
Myriant
Mascoma
Coskata

The Malaysian wave

The Malaysian surge in biofuels is becoming more and more apparent.

The Elevance financing featured the entrance of Lacustrine Limited into the field, a wholly owned subsidiary of Genting Berhad, the holding company of the Genting Group. Genting is one of the largest multinationals, and invested in leisure & hospitality, power generation, oil palm plantations, property development, biotechnology and oil & gas business activities.

Earlier this year, there was the investment in LanzaTech in January by Petronas, the Malaysian state oil company; also in January, an announcement of a joint venture between Japan’s Toyo Engineering Co, Glycos Biotechnologies and Malaysian developer Bio-XCell to build a 10,000 ton per year ethanol plant in Johor Baru by Q2 2013.

Plus, the announcement last month that Gevo signed a collaborative agreement with the intent to site a cellulosic biomass isobutanol facility in Southeast Asia, with the Malaysian government’s East Coast Economic Region Development Council (ECERDC), Malaysian Biotechnology Corp (BiotechCorp) and the State Government of Terengganu.

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