The company pulled back from isobutanol production in September to work out glitches.
Ethanol firm Gevo to buy back $15M of its stock
- Article by: DAVID SHAFFER
- Star Tribune
- January 2, 2013 - 9:38 PM
The owner of a Luverne, Minn., ethanol plant that's struggling to convert its production to a newer, higher-value alcohol said Wednesday it will buy back $15 million in common stock this year.
Shares of Gevo Inc., based in Englewood., Calif., have been hammered by investors, including many short sellers, after the company pulled back from commercial production of isobutanol in September so scientists could work out bugs in its technology.
On Wednesday, shares shot up 18 percent to $1.82 per share, a gain of 28 cents. Even so, that's still far from Gevo's high of more than $25 per share in May 2011.
Michael Ritzenthaler, an analyst who tracks the company for Piper Jaffray & Co., said the buyback is a sign Gevo's board still has faith in management's ability to correct problems at the Luverne plant.
"It bodes well for the fact that the R&D must be going well or they wouldn't have authorized the buyback," he said in an interview.
CEO Patrick Gruber said in a statement the program is "an opportunity to enhance value for our stockholders through disciplined repurchases of shares of our common stock at what we believe are undervalued prices." Repurchases will begin immediately using cash and cash equivalents on hand.
Gevo spent $40 million to retrofit the Luverne plant, completing it in May. It is the company's only commercial-scale production facility. The plant retained the capacity to produce ethanol, which it has resumed making.
Isobutanol is fermented from corn and can be blended with gasoline as a motor fuel. It also can be used to make chemicals and plastics, which is Gevo's main, initial market, and is being tested as jet fuel.
Gevo's process uses proprietary yeasts that are the subject of patent litigation with a competitor. Gevo prevailed in a November appeals court ruling, but the cases are far from over.
"The only things that matter right now are getting Luverne up and running for isobutanol and getting the patent dispute behind them," Ritzenthaler said.
David Shaffer 612-673-7090
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