Posts tagged “Pacific Ethanol”
The Big Names in Biofuels
So you’re hoping to strike it rich by investing in LanzaTech. Or Solazyme. Or KiOR. Or Gevo. After all, some of these companies recently had high-profile IPOs, and they are clearly “hot” given all of the press coverage devoted to them. So perhaps you have decided you want to get in on a potentially unique investment opportunity.
I get more e-mails and phone calls about investments than on any other topic. And it’s not just individual investors. I hear from institutional and private equity investors trying to determine what’s true and what’s hype, and asking whether KiOR or LanzaTech might turn out to be the Google (GOOG) or Apple (AAPL) of biofuels. Before offering any guidance, the first thing I try to do is establish your reason for investing. Are you looking for — in the words of former Fidelity Magellan’s Peter Lynch — a “ten bagger?” Are you looking for a hedge against the end of the oil age? Is this money that you are fully prepared to lose?
The second thing I would ask you is whether you really understand the company, their business model, their competition, and their potential technical challenges. (This is typically why people e-mail me — because they have questions about these things). Let me offer an example from my own investing history to demonstrate why these issues are important by telling you about the worst investing mistake I ever made. CONTINUE»
I don’t actually enjoy posting “I told you so” stories, especially when the news is negative. This means someone has failed, and I don’t enjoy seeing people fail. But when I put a spotlight on a company, naturally I am going to follow that company. If it does fail, then that will be reported upon, as has been the case previously with Xethanol and later on with algal biofuel producer GreenFuel. If a company that I have cast doubts on goes on to success, I will highlight that as well, but I don’t believe that has happened yet. If Coskata proves me wrong, or Vinod Khosla goes on to great success as a biofuel magnate, I will write about it…. Continue»
Comically Terrible Timing In June 2006 I read an article at Financial Sense that promoted ethanol as a great place to put your money:Investing in Ethanol: A “New” Stock Play on Soaring Energy Prices and Why Now is the Time to Invest in this “Fuel of the Future” Among the gems in the article were these: Strap on your seatbelt… an alternative energy source is set to take the world by storm. In this research report, we’ll take a close look at the booming ethanol industry… and how investing in ethanol could prove to be an extremely profitable move for investors. With a mandate from the U.S. government and the obvious need for change, we see this as a fantastic… Continue»
I won’t say I told you so, but I will make a prediction here: VeraSun Suspends Production at Three Distilleries Jan. 9 (Bloomberg) — VeraSun Energy Corp., the second- largest U.S. ethanol producer, has idled three distilleries as demand falls and prices fail to cover the cost of production. Producers have been struggling to make profits amid fluctuations in corn prices. Pacific Ethanol Inc. today said it will suspend output at its plant in Madera, California. On Jan. 7, Aventine Renewable Holdings Inc. said it halted construction of its refinery in Aurora, Nebraska, for up to 180 days. Vinod Khosla hasn’t been immune: Last month, AltraBiofuels Inc., which counts venture capitalist Vinod Khosla among its investors, shut production at its… Continue»
Financial Times has put up a series on ethanol in their “In Depth” section: In Depth: Ethanol I haven’t had a chance to read the articles, but did speak with a Financial Times reporter and had several e-mail correspondences prior to publication of the series. I don’t know yet if they used anything I gave them, but we covered quite a bit of ground. The primary focus of the series is on the causes of the ethanol boom and subsequent bust. I just arrived back in the U.S. last night, so as soon as I liquidate a ton of correspondence, I will put up some new posts.
Wow! I just checked a few stocks that I tend to watch, and Pacific Ethanol (PEIX) has now fallen to $1.85 a share. It is now down more than 95% off its high, and down more than 90% from the first time I warned that the company was overvalued. Once boasting a market cap of almost $2 billion, that has now fallen to $82 million. Now, where are all of those posters who kept telling me what a deal this was after it fell to $10? Like our friend James, who cited PEIX investor Bill Gates’ “ability to see into the future” as a reason to invest in PEIX, and told me I was “very, very stupid” if I thought… Continue»
Don’t say I didn’t tell you so. I warned about PEIX’s poor fundamentals a year and a half ago, and the share price has fallen steadily since then. Pacific Ethanol suffers a bigger-than-expected loss Pacific Ethanol Inc., a California biofuels darling that boasts political connections and an investment from Bill Gates, is short on cash and suffering from higher corn and plant construction costs, which threaten to derail the once-promising biofuels maker. The Sacramento company on Monday posted record-high sales but a larger-than-expected $14.7-million loss in the fourth quarter, reflecting a financial squeeze that has clouded prospects for ethanol producers nationwide. Pacific Ethanol reported the loss just days after it shored up its depleted coffers with a $40-million cash infusion… Continue»
I have been a critic of Pacific Ethanol’s (PEIX) business model for a long time. I criticized it a year and a half ago in an article I wrote for Financial Sense, arguing that it would be very difficult for them to compete with Midwestern ethanol producers. Add in the excess ethanol capacity spawned by government subsidies, which in turn drove corn prices up and crushed ethanol margins, and I couldn’t see how Pacific Ethanol would consistently make money. Today, they announced they were halting construction of their newest ethanol plant: Pacific Ethanol Halts Plant Construction NEW YORK (Associated Press) – Pacific Ethanol Inc. said Monday it has halted construction of an ethanol plant near Calipatria, Calif., because of weakened… Continue»
In June 2006, I warned about Pacific Ethanol (PEIX) in response to a story suggesting that the company presented a great investment opportunity: Ethanol Investing: Counterpoint Some excerpts of what I wrote: I will make the case that many claims regarding ethanol are overblown, and some are simply fiction. I will also take a look at Pacific Ethanol to show why I think the underlying fundamentals make it a very risky investment. Local grain supplies, preferably within 50 miles of the plant, are important for keeping costs down. It will probably be cheaper for a producer to produce ethanol in the Corn Belt, and then ship the ethanol to California than it would be to ship the corn there and… Continue»