Why is Gevo stock so affordable?

Why are Gevo shares down 23 percent this month  when the company is executing its plan in accordance with shareholder guidance?

“The sharpest portion of the selloff came [June 21],” writes Raymond James analyst Pavel Molchanov, “with the stock down 9% amid a strong broader market and calm oil prices. We see absolutely no fundamental reason for this 9% decline. Rather, the reason behind the unusual volatility appears to be a single block of over 900,000 shares sold near midday.

“For some perspective, this is more than 10x the stock’s average daily volume of roughly 80,000 shares. Keep in mind, Gevo’s float remains limited (8.2 million shares) given that the post-IPO lockup doesn’t expire until August. Yesterday’s total volume was so high that 25% of float changed hands, a rare event for any stock.

“We do not rule out the possibility that some of the recent selloff may be related to last week’s [ethanol tax credit] vote in the Senate. If the tax credit were to go away, would Gevo be harmed? The answer: No, it would actually benefit. If ethanol production economics – where margins are already slim – were to further deteriorate, the end result would be more ethanol plant owners gravitating to Gevo for its plant retrofit (which is what Redfield just did)…if anything, Gevo shareholders should be rooting for the tax credit to go away, rather than being apprehensive at such a scenario.

“After the selloff, Gevo shares are at 63% of our discounted cash flow (DCF) estimate of $21/share. This is by far the lowest multiple within the Gen2 biofuel peer group.”