Biofuels company Gevo raised $107 million in an initial public offering yesterday, pricing 7.1 million shares at $15 each.
The company, backed by venture capitalist Vinod Khosla and Virgin’s Richard Branson, sold the shares at the high end of its range of $13 to $15. Biofuels companies Amyris and Codexis IPO’d last year, but at the low ends of their ranges. Gevo originally filed last summer for a $150 million IPO but scaled down its intentions in a filing last month to $100 million.
Gevo’s successful IPO is good news for biofuels and marks an early cleantech IPO for 2011, which venture capitalists like Alan Salzman and Nat Goldhaber have speculated will be a good year for public offerings in the sector. It also highlights some new trends in biofuels — that is, investors are becoming interested in non-ethanol investments.
Like many biofuels companies lately, Gevo’s business plan isn’t contingent on producing biofuels immediately — it focuses first on producing isobutanol, an alcohol compound that can be used as an ethanol substitute. (Other companies, like LS9, have looked to making bio-chemicals to broaden their revenue streams.)
Though Gevo has never turned a profit, it has secured letters of interest from Total, United Airlines and others interested in buying its chemicals and fuels.
“They have a lot of things going for them. They have a capital-light business model to retrofit ethanol (facilities). They have strong partnerships, which was the real reason we thought they might have a successful IPO,” said Andrew Soare, analyst for Lux Research.
“The next couple of years are going to be make or break for Gevo,” he added, saying the company has to show it can successfully pull off the retrofits and produce isobutanol at competitive prices.
While ethanol has started to sour among investors, Khosla is one of a few who has multiple plays in the running. He backed Amyris, which IPO’d last year, and he backs LanzaTech, Coskata, Mascoma, Range Fuels (which recently closed a plant), LS9 and Kior.
Gevo, in fact, wants to retrofit ethanol facilities to produce isobutanol, with commercial production starting in 2012. Its SEC filing placed heavy emphasis on isobutanol’s potential as a building block in materials such as rubber, lubricants and polyester. Isobutanol can be used as a fuel in existing gas tanks, as a fuel blend with gasoline like ethanol, or as a component in plastics and other polymers.
[Image via Flickr/xcbiker]