Gevo, Inc. (NASDAQ: GEVO)
Gevo has been an incredibly interesting stock to follow as of late. Last week, the stock soared as it was announced that their renewable fuel will be used in airplanes. However, a recent announcement with regard to a secondary offering sent the value of the stock downward. Nonetheless, the secondary offering is actually good news. Today, we’ll talk about the airline that has adopted the bio fuel, why the secondary offering is a good thing, and what we can expect to see from GEVO moving forward.
Trade smarter and make more money with Tradespoon!
GEVO Fuels To Be Used By Alaska Airlines
Gevo is a company that is focused on the manufacturing of chemicals and bio fuels, and they recently made an announcement with regard to the use of the bio fuel. Last week, it was announced that Alaska Airlines had adopted the fuel and would start using it on some of their flights.
This is incredibly positive news. After all, think about all of the fuel that Alaska Airlines uses. This will greatly increase the demand for Gevo’s bio jet fuel. However, I don’t thing that it’s going to stop there.
You see, there has been a big movement over the past several years for the world to push to reduce their greenhouse gas emissions. To do so, a reduction in global reliance on fossil fuels is necessary. As GEVO fuels prove to be productive in the Alaska Airlines jets, more and more airlines are likely going to be contacting the company for a quote. After all, not only are bio fuels generally cheaper, but when companies go green consumers love it, so this will help other airlines to build and maintain strong brands.
GEVO Launches Secondary Offering
Shortly after the news that Gevo fuels would be used in Alaska Airlines planes, the stock climbed exponentially. However, days later, the company announced that it would be launching a secondary offering, which led to declines. After all, a secondary offering means that more people will be eating off of the same pie, making everyone’s piece a bit smaller.
The secondary offering will be of 21 million shares with an initial price of $0.45 per share. This will drive an estimated $9.5 million to GEVO. In a statement, GEVO CEO Pat Gruber had the following to say with regard to the secondary offering:
“We’ve been operating on an extremely tight budget… Our back was to the walls. Having some cash is extremely useful at this stage in creating the best strategic options.”
While many see the secondary offering as a bad thing, I’m actually looking at it through more positive light. The reality is that companies generally need capital to grow. Growing production capabilities, marketing, and more all costs the company money. At this stage in the game, GEVO is likely going to need to increase its production capability for the orders that are to come. As a result, the company is in need of funding. While they could have taken out loans, that would have increased the risk to shareholders, making a secondary offering the best move!
Sure, the piece of the pie may be getting slightly smaller. Nonetheless, this pie is going to grow to be a massive one. So, everyone should eat well, regardless! Honestly, I think this move is brilliant!
Where Is The Stock Headed?
If you ask me, I see tremendous upside potential in Gevo. The reality is that the deal with Alaska Airlines is likely only the tip of the iceberg. As mentioned above, as the fuels prove to be successful in Alaska Airlines planes, we can expect to see more airlines follow suit and move toward renewable fuels. Since GEVO is one of the very few providers in that industry, and the leader on top of that, the company is likely to take the lion’s share of growth in the industry. All in all, I see incredible growth in the stock’s future.
Don’t waste your time! Click here to find winning trades in minutes!
What Do You Think?
Where do you think GEVO is headed? Join the discussion at TalkTRENDZ from CNA Finance!
[Image Courtesy of Pixabay]