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Why Gevo Stock Popped Today

By Jeremy Bowman - Updated Jan 25, 2021 at 4:04PM

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Shares of the alternative-fuel company gained on a bullish analyst note and as it closed on a stock offering.

What happened

Shares of Gevo (GEVO -1.07%) were rallying again today as the renewable energy company said it has closed on a recent $350 million stock offering, and an analyst lifted his price target on the stock.

As of 2:54 p.m. EST, the stock was up 29%.

Corn kernels

Image source: Getty Images.

So what

Gevo, which specializes in converting crops like corn into traditional fuels like gasoline and jet fuel, said that it closed on the stock offering this morning after initially announcing the move last Wednesday. The company sold 43.75 million shares at $8 each and will receive $321.7 million after fees, which it plans to use for capital projects (including the new Net-Zero 1 plant in South Dakota) as well as working capital and general corporate purposes.

Notably, the stock actually fell last week when the company announced the stock sale, so it's unclear if the closing was material in today's gain, though the offer does show strong demand for the stock.

A clear endorsement for Gevo came from Noble Capital Markets' Poe Fratt, who lifted his rating to $16 from $8.25 in part because of the "massive" equity offering, which he said will give the company about $534 million in pro forma cash. He also believes that the funding will make up the majority of the equity necessary for the company's first two Net-Zero plants. Fratt maintained his outperform rating on the stock.

Now what

Gevo's stock has skyrocketed since the company announced in December that it would be opening its new Net-Zero 1 plant in South Dakota. The stock has historically been a laggard, but has found new life amid bullish hopes in the renewable energy sector, and its unique technology separates it from most alternative-fuel stocks. 

Still, investors should be aware that high expectations are now baked into what's essentially a development-stage company. Gevo's market cap exceeded $2 billion today, but the company only brought in $5 million in revenue in the first three quarters of 2020.  

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