Another Shattering Secondary Offering for Renewable Fuels (PEIX, GEVO, BIOF, GPRE)

Ethanol producer Pacific Ethanol Inc. (NASDAQ: PEIX) is watching investors crush the company’s stock following this morning’s announcement of a secondary offering of 28 million units at a price of $0.43/unit. Each unit includes one share of stock, one warrant to purchase one share common stock (a ‘Series I Warrant’), and one warrant to purchase one-half share of common stock (a ‘Series II Warrant’).

Yesterday Gevo Inc. (NASDAQ: GEVO) got torched on the mere notice of an intention to hold a secondary offering or the issuance of convertible debt. And there are plenty of others that could begin lining up for more cash soon.

Biofuel Energy Corp. (NASDAQ: BIOF) recently effected a reverse split of 1-for-20 shares in order to keep its exchange listing. Pacific Ethanol has already done a reverse 1-for-7 shares split this year. Green Plains Renewable Energy Inc. (NASDAQ: GPRE) has not done a secondary offering for several years.

Pacific Ethanol shares closed at $0.53 last night and are currently trading down -36.2% at $0.34 in a 52-week range of $0.25-$1.85. Given the company’s ticklish cash situation and its plunging share price, delisting is again possible here, but the company appears to be willing to allow that to happen in exchange for cash. Later, after it regains control of its plants, it could re-list. At least that’s one scenario. Of course, there are others that are not so rosy.

Paul Ausick