Gevo raises $107 million in IPO; Solazyme next?

February 8, 2011 |

Every year the Digest makes predictions for the upcoming year, and readers usually have to wait almost 12 months to score the effectiveness of our magic crystal ball.

That hardly seems fair, so we thought we would make some new predictions, based on work by the stealthiest sleuthing by our Digesterati.

We believe that there are not one, but three hot stories out there, and you’ve now got ’em.

1. Gevo’s IPO. Drats, just when we get a prediction out, Gevo prices at $15, raising $107 million, valuing the company at $373 million.

We had noted, Over the past few days, we have seen the same kinds of activity that we saw with Amyris in its last few hours before pricing. We may well see Gevo price tonight, after a whirlwind two-week road show. We hear, as with Amyris, low levels of interest, but we are expecting a handful of large institutionals to step up for the investment – some of them well remembering the Christmas bonuses they earned with a similar gut-check call with Amyris in September.

Highlights from the road show, according to our Digest spies. The company is touting that it will cost $40-45 million for each conversion of an existing ethanol facility to the production of biobutanol. The company is now projecting it will produce fuels and chemicals in the $3.20-$3.50 ramie in 2012, and reduce that cost to between $2.95 and $3.40 by 2015. Gevo is say, also, that it can double the EBITDA of an ethano facility via the conversion, at its projected yield of 101 gallons per ton of biomass, in this case corn.

Synthetic biology in a nutshell: fermentation time is reported by Gevo, as of last fall, at 52 hours. What everyone wanted to know, but had to bite or pass on the IPO, blind – what is the fermentation rate today? Fast rate, lower opex, higher margins, higher value.

2. Solazyme. Based on our evaluation of reports from sources, we now expect Solazyme to file an S-1 registration for its own IPO before the end of March. Informed speculation from the Digesterati reports that the decision has been made in the last two weeks in investor and board meetings, and the company is hard at work preparing materials for a spring pre-IPO roadshow. What are they waiting for? Last piece in the puzzle could well the pricing and post-IPO trading in Gevo stock. Solazyme, characteristically, is keeping its lips zipped on this one.

We expect that at least one more major partnership announcement will be made during the run-up to an IPO event, and we suspect that Solazyme, like others, may be headed for another major announcement regarding its operations in Brazil. We have been watching the Bunge partnership with great interest, and we suspect that the sugar and oil-trading giant may have big plans to find low-cost ways to fatten up Solazyme’s sugar-munching algae.

Is anyone else in the wings? For sure, at least two IPO candidates are more in the pipeline, waiting on Gevo. More from the Digest on those at a later date.

3. Butamax heads for Brazil. BP-DuPont joint venture in biobutanol, Butamax – we believe that, based on what we are hearing in the field, that the company is developing interest from potential Brazilian partners faster than anticipated, and in fact the first commercial plant built using the Butamax technology may well be in Brazil.

Last November we had reported, “previewing the bolt-on biobutanol technology that Butamax is expecting to commercialize with corn as a feedstock by 2012, and sugarcane by 2013-14, [Butamax CEO Tim] Potter confirmed that the company is in discussions for “conversions…that’s with an s” in the United States, and is expecting to focus on Brazilian sugarcane for export.”

But 2013-14 may prove to have been overly conservative for Brazil – in fact, Pam Schools of Butumax confirmed today that “it’s become a bit of a horserace between the two”. The Brazilian ethanol producers, she noted, are getting far more accustomed to visits from, and discussions with, US advanced biofuels technologies, and that may well be playing a role in the speed-up.

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