What happened
For the second day in a row, renewable fuels company Gevo (GEVO -10.16%) charged higher on Thursday, topping a 4.6% gain as of 1 p.m. EST.
Curiously, it appears that today's rally was sparked by news that's at least a week old already.
Image source: Getty Images.
So what
Last week, if you recall, I explained how Gevo had mentioned in an SEC filing that it had converted $12.7 million worth of "12% convertible senior secured notes due 2020/2021" from debt into equity, issuing 5.7 million new shares of common stock and diluting its shareholders a bit -- but rendering its convertible debt "fully paid and terminated as of Dec. 31, 2020."
But apparently not everyone got that memo. And so yesterday, Gevo made the news explicit, issuing a separate press release confirming that it has "reduced the general corporate secured debt balance to zero" and boasting of its "continued strengthening of the Company's balance sheet."
Now what
In short, both yesterday's rally and today's appear to have been sparked by Gevo reiterating something that it had already told investors. That's not bad news, but it's also not new news.
The upshot of it was, and still is, that Gevo's balance sheet has improved and its share count is growing (meaning that shareholders' shares represent an increasingly small ownership stake in the company, per share), but its debt has now been reduced to essentially zero, with $80 million in the bank and another $150 million on the way from new share issuances.
This means that the company each share represents an ownership interest in is now a more valuable company. Because of this, I think the added value probably balances out the dilution -- and indeed, puts Gevo in a more secure position than it was in at the end of last year.
