GEVO Long Term Investment
For those of your looking to invest in companies that have long term potential to grow in a changing world you may want to look at the company Gevo.
Ironically I had been on the phone with a friend talking about Gevo stock the day before a rally that saw the price change +400% the next day; going up from 56 cents/ share to 2.16/ share before settling all the way back down to the $1.20-1.30/ share range. Unfortunately I missed it.
But there would have been no way to know the news that caused the rally until the opening bell that day. Gevo landed a $900 million purchase agreement with a commodity trading company; bringing their total contracts for product purchasing to $1.5 billion between now and 2023.
What does Gevo do and why might they see long term growth? Gevo is a biotechnology company that has a proprietary process for producing renewable chemicals and hydrocarbons (biofuels). Wait a moment you may say.....there have been lots of renewable chemical companies that have experienced stock bursts following offtake agreements that have later struggled, crashed, or experienced slow growth at best.
What might make Gevo different?
Gevo's technology is dependent on a proprietary yeast strain, presumably S. Cerevisiae, they have developed that can ferment sugars into Iso-Butanol. Ethanol fermentation via S. Cerevisiae is a well established industry with a huge amount of established infrastructure. Gevo's technology is a plug and play match with the entire ethanol fermentation industry.....albeit with the end product a higher value alcohol due to the fact it can be synthesized into octane and octene, the primary components of gasoline, as well as various other compounds, think butadiene or other polymer precursors, with common and well established chemical reactions. Where once an alcohol worth around $2.20/ gallon was produced, now a few extra dimes can be committed to synthesizing an alcohol into $3.60/ gallon gasoline. Additionally, they have developed a continuous extraction method whereby the iso-butanol is continually extracted from the fermentation broth, negating the need for batch distillation. This cheapens product recovery by a wide margin over other extraction methods. Their feedstock is # 2 corn, or various other crop commodities such as sorghum, which have an established supply chain into the very same ethanol refineries that can plug and play with Gevo's proprietary yeast.
How does this set them apart? Many startup companies in the biofuels or renewable chemical industry developed technology that either relied on very novel organisms such as E. Coli or algae's with little established use in mass scale biochemical manufacturing of commodities, or relied on technology that needed infrastructure that did not yet exist, such as thermo-chemical refineries that break down organic waste into hydrocarbons using intense heat or pressure. These companies would or will rely on establishing new supply chains for their feedstock, such that the feedstock can be amalgamated where it is needed. For example, to convert municipal solid waste into raw chemical products, you would need to build a brand new refinery at a landfill such that your feedstock was amalgamated where it was needed.
For the above reasons Gevo's technology should be much faster to scale and much more likely to succeed than other biotechnology and renewable chemicals companies and manufacturing processes.
Tomorrow 38 million shares of Gevo stock are being sold to an investor for $1.30. In the optimistic scenario we can expect that, in the coming weeks, the 50 MA may bounce off the 200 MA sending the share price towards higher price points. Some analysts have valued the share price up to $2.40
Maintaining and expanding their manufacturing capacity and meeting volumes of their supply agreements will be crucial to long term growth; but if they do we should expect that Gevo's technology to slowly expand around the world as competition from chemical refining methods using cheap amalgamated crop and waste feedstocks, combined with low oil prices brought about by electrification of the transportation sector, send the petroleum drilling industry into a long slow death spiral as the capex of drilling new oil wells has poorer and poorer returns. This trend can be observed with the surge of retrofits of petroleum refineries into those capable of processing renewable diesel and gasoline from used vegetable oil, animal fat, and other waste feedstocks.
Ironically I had been on the phone with a friend talking about Gevo stock the day before a rally that saw the price change +400% the next day; going up from 56 cents/ share to 2.16/ share before settling all the way back down to the $1.20-1.30/ share range. Unfortunately I missed it.
But there would have been no way to know the news that caused the rally until the opening bell that day. Gevo landed a $900 million purchase agreement with a commodity trading company; bringing their total contracts for product purchasing to $1.5 billion between now and 2023.
What does Gevo do and why might they see long term growth? Gevo is a biotechnology company that has a proprietary process for producing renewable chemicals and hydrocarbons (biofuels). Wait a moment you may say.....there have been lots of renewable chemical companies that have experienced stock bursts following offtake agreements that have later struggled, crashed, or experienced slow growth at best.
What might make Gevo different?
Gevo's technology is dependent on a proprietary yeast strain, presumably S. Cerevisiae, they have developed that can ferment sugars into Iso-Butanol. Ethanol fermentation via S. Cerevisiae is a well established industry with a huge amount of established infrastructure. Gevo's technology is a plug and play match with the entire ethanol fermentation industry.....albeit with the end product a higher value alcohol due to the fact it can be synthesized into octane and octene, the primary components of gasoline, as well as various other compounds, think butadiene or other polymer precursors, with common and well established chemical reactions. Where once an alcohol worth around $2.20/ gallon was produced, now a few extra dimes can be committed to synthesizing an alcohol into $3.60/ gallon gasoline. Additionally, they have developed a continuous extraction method whereby the iso-butanol is continually extracted from the fermentation broth, negating the need for batch distillation. This cheapens product recovery by a wide margin over other extraction methods. Their feedstock is # 2 corn, or various other crop commodities such as sorghum, which have an established supply chain into the very same ethanol refineries that can plug and play with Gevo's proprietary yeast.
How does this set them apart? Many startup companies in the biofuels or renewable chemical industry developed technology that either relied on very novel organisms such as E. Coli or algae's with little established use in mass scale biochemical manufacturing of commodities, or relied on technology that needed infrastructure that did not yet exist, such as thermo-chemical refineries that break down organic waste into hydrocarbons using intense heat or pressure. These companies would or will rely on establishing new supply chains for their feedstock, such that the feedstock can be amalgamated where it is needed. For example, to convert municipal solid waste into raw chemical products, you would need to build a brand new refinery at a landfill such that your feedstock was amalgamated where it was needed.
For the above reasons Gevo's technology should be much faster to scale and much more likely to succeed than other biotechnology and renewable chemicals companies and manufacturing processes.
Tomorrow 38 million shares of Gevo stock are being sold to an investor for $1.30. In the optimistic scenario we can expect that, in the coming weeks, the 50 MA may bounce off the 200 MA sending the share price towards higher price points. Some analysts have valued the share price up to $2.40
Maintaining and expanding their manufacturing capacity and meeting volumes of their supply agreements will be crucial to long term growth; but if they do we should expect that Gevo's technology to slowly expand around the world as competition from chemical refining methods using cheap amalgamated crop and waste feedstocks, combined with low oil prices brought about by electrification of the transportation sector, send the petroleum drilling industry into a long slow death spiral as the capex of drilling new oil wells has poorer and poorer returns. This trend can be observed with the surge of retrofits of petroleum refineries into those capable of processing renewable diesel and gasoline from used vegetable oil, animal fat, and other waste feedstocks.
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