More Bio-Bang for the Buck

The biorefining IPO phenomenon explained
| September 20, 2011

Kior Inc. is trading between $14 and $16 a share, but if Kior’s common stock doesn’t quite have what a trader is looking for, several other biorefining companies are currently available. Gevo Inc. is going for around $10, Amyris around $20, and Solazyme is in the high $11-per-share range. What does the stock pricing for each biorefining company say about the industry? Not much, but the fact that so many biobased companies are currently available on the stock market does.

Cindy Thyfault, president and CEO of Westar Trade Resources, a company that helps biorefining companies seek out and obtain funding, has been following all of the companies that have gone public in the past two years. “What I’ve learned is that you have to show a long track record of investment up to the point of the IPO,” she says, adding that most of the companies that have gone public have had at least $100 to $150 million in investment money. In addition to a successful IPO, she also points out that a company needs to show the backing of some serious venture capitalists, but it’s her last point that might show why the biorefining sector is poised for growth. A company, she says, “has to show a broad range of products, not just fuels.”

Although Thyfault mentions that some investors are uneducated on the number of technologies and products biorefining firms can offer today, her assertion that an IPO must be preceded by the possibility of multiple product offerings could indicate one reason for the IPO trend in the industry. Under the general assumption that venture capitalist investment dollars are tight, the idea of investing in a single company that can generate revenue via multiple markets might make sense.

California-based butandiol company Genomatica announced it was going public in August, and the firm can produce biobased alternatives for at least nine different chemical products. Solazyme can produce renewable diesel, airplane deicing fluids and skin care products, and Amyris, like Solazyme, can produce fuels along with a large suite of other products that includes malaria-fighting drugs. Given the number of product and market offerings in which these types companies can operate, the reason so many biorefining companies have issued IPOs seems pretty clear. Of course, these innovative firms need the funding dollars an IPO brings, but if these companies know that they can offer more bang for the buck to investors looking to spend wisely, why wouldn’t they join the IPO craze? 

—Luke Geiver