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Why Shares of Solazyme Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Solazyme (NASDAQ: TVIA  ) fell as much as 20% today after it agreed to dissolve a promising joint venture.

So what: Solazyme and Roquette, a starch and starch-derivatives company, agreed to dissolve a joint venture formed in 2010 to create alternative foods from microalgae. The companies couldn't decide on a manufacturing and marketing strategy so they decided to go their separate ways.  

Now what: Instead of going forward with Roquette, Solazyme said it will accelerate commercialization of its own food ingredients, so this could result in earlier revenue than the joint venture would've provided. But, without the backing of a major food player, the company faces more risks. Until Solazyme can prove that it can commercialize products and generate significant revenue, I'm staying away. A $670 million market cap is pricing in a lot of success for a company with just $6.7 million in revenue last quarter.

Interested in more info on Solazyme? Add it to your watchlist by clicking here.

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