Gevo Stock Falls After Pricing Public Offering

NEW YORK (TheStreet) -- Shares of Gevo (GEVO) were falling 9% to $4.07 Thursday after the chemical company priced the 4.3 million common stock units in its public offering.

Gevo priced the 4.3 million common stock units at $4 a common stock unit. Each common stock units consists of one common stock and one-tenth of a Series C warrant to purchase one share of common stock. The warrants will have an exercise price of $5.50 a share, and be exercisable from the state of the issuance and will expire on May 19, 2020.

The company said it expects gross proceeds of about $17.2 million from the offering, not including future proceeds from the exercise of the warrants. Gevo plans to use the proceeds from the offering to fund working capital and for general corporate purposes.

TheStreet Ratings team rates GEVO INC as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:

"We rate GEVO INC (GEVO) a SELL. This is based on some significant below-par investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for GEVO INC is currently extremely low, coming in at 1.37%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, GEVO's net profit margin of -116.60% significantly underperformed when compared to the industry average.
  • GEVO's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 64.67%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GEVO INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is somewhat low, currently at 0.86, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.73 is somewhat weak and could be cause for future problems.
  • Net operating cash flow has significantly increased by 58.35% to -$6.38 million when compared to the same quarter last year. In addition, GEVO INC has also vastly surpassed the industry average cash flow growth rate of -51.31%.
  • You can view the full analysis from the report here: GEVO Ratings Report

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