Gevo raises $101M in secondary equity, debt offering

July 2, 2012 |

In Colorado, Gevo announced that it has agreed to sell 12,500,000 shares of its common stock at a public offering price of $4.95 per share. The gross proceeds to the Company from this offering are expected to be $61,875,000, before deducting underwriting discounts and commissions and other estimated offering expenses.

Gevo granted the underwriters a 30-day option to purchase up to an aggregate of 1,875,000 additional shares of common stock to cover over-allotments, if any. All of the shares in the common stock offering are to be sold by Gevo.

The Company also announced the pricing of its public offering of $40,000,000 aggregate principal amount of 7.5% convertible senior notes due 2022. The gross proceeds to the Company from this offering are expected to be $40,000,000, before deducting underwriting discounts and commissions and other estimated offering expenses.

Analyst Reaction

Pavel Molchanov, Raymond James

Gevo has completed an offering of equity and convertible debt, in the face of a highly risk-averse market, as shown by the stock’s painful plunge since launching the offering. The dilution is steeper than we had anticipated, but the capital raise itself is not surprising, having been clearly telegraphed by management in recent months. The fact that the stock fell 22% on Wednesday and another 27% yesterday says more about the current state of the market than it does about Gevo. The lamentable reality is that early-stage stories in general – not just Gevo, not just biofuels, and not just clean tech – are rarely regarded with much favor in a market that is as jittery, risk-averse and short-term focused as the current one.

Given the steeper-than-expected dilution, our DCF/share estimate decreases from $10.24 to $9.44 (detailed on page 2). Shares are currently at 51% of the new DCF estimate. Our target price commensurately decreases from $8.50 to $7.00, based on 75% of the DCF estimate.

Rob Stone and James Medvedeff, Cowen & Co

As expected, GEVO raised capital to fund ongoing operations, construction of the Luverne and Redfield plants, and pay down debt from Triple Point, an early project partner. Management had clearly indicated a need to raise capital, and the timing makes sense now that the preliminary injunction was denied. A round was included in our model, but revised estimates reflect the final details. Additional financings remain likely in the future. We see 30%+ upside relative to the market in twelve months.

Due to higher share count, we now model 2012-13E losses of $1.98 and $1.10 per share vs. prior ($2.37) and ($1.45). We model 2014-15E EPS of 29c and 84c vs. prior 37c and $1.20.

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