Gevo Surges on Plans to Repurchase $15 Million in Shares
Gevo Inc. (GEVO), which halted production of its flagship biofuel product in September, rose the most in six months after saying it will repurchase as much as $15 million of its “undervalued” stock this year.
Gevo climbed 18 percent to $1.82 at the close in New York, the most since June 20.
The company will fund the purchases with cash and cash equivalents, Englewood, Colorado-based Gevo said today in a statement.
The purchase is a sign that the company is making progress in its efforts to resume production of isobutanol at its plant in Luverne, Minnesota, said Pavel Molchanov, an analyst at Raymond James & Associates Inc. in Houston.
The buyback program sends “a very positive signal” and “we agree wholeheartedly” that the stock is undervalued, Molchanov said today in an interview. The company had about $92 million in cash as of Sept. 30, more than its current market value of $70.5 million.
The shares fell 53 percent from Sept. 24 through the end of the year after the company said it was curtailing isobutanol production in Luverne to make changes to its manufacturing process. The chemical, a four-carbon alcohol that Gevo makes from corn, is blended with gasoline or used to make plastics, jet fuel and other products typically derived from petroleum.
The “repurchase program reflects our confidence in Gevo’s future,” Chief Executive Officer Patrick Gruber said in the statement.
The manufacturing problems came in the execution phase, said Mike Ritzenthaler, an analyst at Piper Jaffray Cos. in Minneapolis. He expects Gevo to resume production of isobutanol at the plant in the second quarter. It’s currently making ethanol.
“Management’s job now is to regain a bit of credibility after the snafu they had in production,” said Ritzenthaler. “This may be the first sign things are starting to move in the right direction.”
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