Share and dilution are two words which investors do not like to see sitting next to each other. Unfortunately, for those backing Gevo (GEVO), that’s what they got on Monday. Investors showed their disapproval of the combination by sending shares down by 33% in the session.
The drop came after the company announced a massive public offering. The renewable fuel start-up has entered an agreement with a number of institutional investors for the purchase of 33,333,336 Gevo shares. These will be sold for $4.50 each and should pocket the company around $150 million. The company said it will use the windfall to “fund capital projects, working capital, and for general corporate purposes.”
But that was not the only news to come out of Gevo HQ. On a more positive note for investors, the company also disclosed it had entered a collaboration with Google Cloud.
By using technology developed by Gevo division Verity Tracking, across the supply chain, the alliance will measure and verify the effectiveness of next-generation biofuels. Utilizing datasets and analytics tools from Google Cloud, the collaboration is anticipated to enable users to track and verify emissions and will allow companies to form a more data-driven approach in comprehending and reducing GHG (greenhouse gas) intensity across the globe.
The news, however, was not enough to placate disgruntled investors.
“While the partnership with a leader in the technology sector may help increase the adoption of carbon tracking, the announcement is overshadowed by the ATM offering at what we view as depressed prices and an increase of 33% to its FD share count,” said Stifel analyst Derrick Whitfield.
However, Whitfield remains bullish on GEVO’s prospects, sticking with a Buy rating and $11 price target. The figure makes room for one-year growth of a bountiful 250%.
While that price target is indeed bullish, it is not as high as other analysts’ expectations; The Street’s average target stands at $15.25, suggesting shares will surge by a huge 385% over the next 12 months. Unsurprisingly, the analyst consensus rating on the stock remains a ‘Strong Buy’ (See Gevo stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.