Why Shares of Rentech, Inc. Jumped Today

Is this meaningful or just another movement?

Travis Hoium
Travis Hoium
Apr 10, 2014 at 4:04PM
Energy, Materials, and Utilities

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 Rentech (NASDAQ:RTK) jumped 13% today after getting an important strategic investment.

So what: Blackstone Group LP's credit arm called GSO Capital Partners LP is investing $100 million in convertible preferred stock and $50 million in a term loan. In return, Blackstone will get two seats on the board of directors.  

Now what: The money is going to be used to grow the wood fibre processing business, where management is hoping to find a new growth market. The good news is that the capital will allow expansion but it also comes with the dilution option if the business does grow profitably. All in all, it's a good move for Rentech and it'll be important to see how the wood fibre business progresses over the next few years because management is making a big bet on this market.