What happened
Shares of Gevo (GEVO 2.06%) were climbing today after the alternative fuel specialist announced that it had exercised an option to purchase 239 acres of land in South Dakota, capitalizing on an expansion opportunity.
The stock was up 19.7% as of 4:36 p.m. EST.
Image source: Gevo.
So what
Gevo specializes in turning renewable products like crops into conventional fuel products like jet fuel and gasoline. Today, the company said that it would build a production facility near Lake Preston, South Dakota, that's expected to produce 45 million gallons of jet fuel and renewable gasoline products.
It also said it had met the first milestone in its $1.5 billion contract with Trafigura, a commodities trading company, to secure control of a site by the end of the year. In August, the company signed the deal -- the biggest contract in its history -- to provide Trafigura with 25 million gallons per year in fuel, most of which will be renewable gasoline.
Now what
Gevo's history as a publicly traded company has mostly been a disaster as the company has undergone several reverse splits and is worth a fraction of what it was at its 2011 IPO. The company has also traded in penny-stock range, generally defined as under $5, for several years. Shares are still worth less than $3 each after today's jump.
Gevo also has virtually no revenue to speak of, generating just $5 million in sales through the first three quarters of the year. While the technology sounds promising, especially given the broader tailwinds toward renewable energy, Gevo is still an unproven business. Investors are better off waiting for some meaningful financial results to see if Gevo's technology can deliver at scale.
