Solazyme IPO nets up to $227M

May 27, 2011 |

Renewable oils pioneer sets sector IPO record. What made Solazyme different? What’s the impact on other industrial biotech IPOs?

In California, word came from Solazyme that they have priced their IPO at $18 and will rake in an industrial biotech record of $227M, should underwriters also sell 1.65 million additional shares in over-allotments over the next 30 days.

The 10.375 million shares expected to transfer today will net $197.55 million for the company and co-founders Jonathan Wolfson and Harrison Dillon, who each unloaded small stakes in the offering.

Both the number of shares and the pricing was more than 10 percent above the figures projected by the company in their final pre-IPO SEC filing, earlier this month, which had pointed to potential maximum proceeds of $184 million including over-allotments. It represents a record IPO for advanced industrial biotech.

The company is expected to begin trading on NASDAQ today as SZYM, and indications from Digest sources point to a strong aftermarket from retail investors.

What made Solazyme different

First of all, Solazyme did not have to go first. Successful IPOs from Codexis, Amyris and Gevo in recent months ploughed the row, and investors have noted the strong aftermarket performance from Amyris and Gevo (both up more than 50 percent over their IPO price), a good earnings report from Codexis in the past quarter, and no relief on high global oil prices in sight.

But Solazyme presented an impressive case, with its focus on algae as an industrial microbiology platform for producing renewable oils (as opposed to yeast fermentation, in the case of Gevo and Amyris) took full advantage of a strong buzz around algae as a high-yield biomass platform. It also had achieved impressive progress along the cost curve towards parity with fossil-based oil, with its latest filing indicating that the company can produce, at full commercial scale, renewable oil at $3.44 per gallon at its current stage of evolution. A back-off in global sugar prices (the company feeds sugar to its algae) helped, as did a dizzying array of offtake partnerships which booked the company’s complete oil output through 2015.

Solazyme also defied the conventional wisdom that algae is a phantom feedstock by delivering more than 450,000 gallons under a series of government fuel contracts, and commencing delivery to a wide array of bio-based product partners for fragrances, skincare, food products, fuels and bio-based chemicals. Among their diverse set of offtake partners – the US Navy, Dow Chemical and L’Oreal.

As Digest contributor Peter Brown remarked, “The key of course is that Solazyme produced, not much, but enough for a proof of concept. A number of companies have come to the table with no actual production figures, and that puts them squarely in the DotCom scenario. This can only be good for the industry and other biofuels companies should take heed.”

In the aftermarket, the company can be expected to reap the benefits of a relatively strong commitment to communications and outreach – dating back to, say, the Soladiesel-powered car seen at the Sundance Film Festival back in 2008 for the debut of the documentary “Fields of Fuel,” and continuing today, with the company having 9,000 followers on Twitter. by far the largest company following we are aware of.

Impact on other industrial biotech IPOs

Clearly, the new confirms that the IPO window remains open and investor interest is running strong. The agents for KiOR and Ceres, which have filed for $100 million IPOs in recent weeks, will draw the obvious parallels, and we may see even more companies filing in upcoming weeks. Candidates from the upper echelon of the 50 Hottest Companies in Bioenergy include LS9, Coskata, Cobalt Technologies, Sapphire Energy, Virent, Mascoma, and Enerkem – and companies such as ZeaChem, Qteros, Algenol, Lanza tech, Aurora Algae, and Joule Unlimited will be carefully monitoring the trends, and weighing the attractiveness of market conditions against the early-stage nature of their progress towards full commercialization.

Joining the Biofuels Digest Index

With its new public status, on Monday Solazyme will join the Biofuels Digest Index of 30 publicly-traded industrial biotech and biofuels stocks – along with Syntroleum (SYNM).

For more on the Solazyme IPO, our coverage includes:

Looking at the Solazyme IPO.

The Band Wagon: investors, first gen biofuels, oil companies join the advanced biofuels parade.

Solazyme files $100M IPO.

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