Xethanol's X-Factor

The only sell-side analyst who follows Xethanol (XNL Quote) finds himself in a less generous mood lately.

Ian Horowitz, the alternative energy expert at Soleil Securities, set out to be fair this spring as he prepared to start coverage of the Amex-listed micro-cap stock. He works a mere three blocks from Xethanol's new corporate headquarters in midtown Manhattan. He could certainly spare the time to visit with leaders of a company that planned to be the first to profitably convert waste into ethanol.

Horowitz ran into trouble from the beginning, however. He says that Xethanol originally claimed that its top executives could not meet with him until well after his deadline. Then, he says, even after the company changed its mind, Christopher d'Arnaud-Taylor -- ousted this week as CEO -- failed to show up for the scheduled appointment.

Horowitz apparently got nowhere with other company representatives, either before or after he started coverage of Xethanol June 6 with a price target of $10.

"They said, 'You don't get it. You just don't get it,' " Horowitz recalls. "Now I'm thinking, 'You're right. I should have had you at sell.' "

He does now. Howowitz cut his rating to sell and his price target to $1.35 late Wednesday.

But at one point, as Horowitz pressed the company for information, Xethanol actually suggested a more extreme call, he says.

"The guy said, 'We don't care what you write,' " Horowitz marvels. " 'We don't care if you rate this a screaming short.' "

Like many, Horowitz recognized that Xethanol could hit the jackpot if the company keeps its promises and actually achieves its goals. At the same time, however, he sensed enough risks to stop short of pushing new investors into the stock.

Xethanol has lost more than 40% of its value since Horowitz started covering the company in June. The shares rose 7 cents Wednesday to $5.20.

In a nutshell, Horowitz has two major questions about the company.