Amyris IPO looms: deal or no deal?

In California, Amyris Biotechnologies is in the final stages leading to the pricing of its IPO, and just two questions remain, but they are big ones:

1. How will Amyris price if at all, and begin public trading.
2. Is it a safe buy, or a long shot?

Here’s what the Digest’s editors and sources have to say on the subject

Three reasons to run far, far away from this IPO.

1. Biofuels are cold. CDXS has dropped 40 percent since a weak opening.

2. Cleantech is sputtering. Thin-film solar pioneer Solyndra abandoned its $300 million IPO, and replaced it with a $175 million private round from its current investors.

3. Amyris doesn’t have cheap enough sugar in order to scale. A commentary at Gerson Lehrman.com opined “Biofene currently costs $6 per gallon to produce and the lowest achievable production cost is over $3. With improved efficiency, niche markets in specialty chemicals and cosmetics could be cash flow neutral, but with limited volume potential, they are unlikely to cause high market capitalization.”

Three reasons to jump in with the Amyris IPO

1. Biofuels are hot. A source close to the Amyris deal said, “Some companies are ready, some are not. $100 million won’t do it. Two quarters later all the excitement is gone and what do you have. You need factory revenues.” Amyris has been building just that.

2, Cleantech  is booming. Tesla just closed a $226 million IPO last week, while cleantechn businesses around the globe have received more than 1.5 billion in investment in the past year,

3. Amyris has cheap enough sugar, in order to scale. Few think that Amyris is really chasing the easy sugars in its cane, that sell for as much as 12-15 cents per pound. Amyris is not even really competing with biomass business for power (for a while) – Brazil’s grid is too fragile to accommodate a firehouse of biomass power in the near future. Amyris could go as low as $2.50 per gallon for its drop-in diesel fuels.

So there’s the tale of the tape: the issues are easy to define as they are tough to weigh. It depends on who and what you believe.

The Digest’s take. Winner. Difficult to see that flurry of deals announced in the past week as insubstantial fluff. But watch out – it runs into the “Two quarters later all the excitement is gone and what do you have” rule.

Rick Daniels of Daniels McGowan commented: “Companies should go public based on earnings because the stock price should be set as a multiple of earnings.  We all learned that when the
“.com” market fell apart.  Ten cents in earnings, priced at 10 times earnings, equals a dollar stock.  Zero earnings, selling at 10 time earnings….well that’s pretty obvious. Also, get a good underwriter, listen to them and don’t rush it ( as suggested in the BFD article and absolutely correct).  This comment is not directed at Amyris, I’m sure they are in excellent hands, but it’s for all those who are thinking about the public venue it in what is a very tough market for capital appreciation.”