Gevo: Richard Branson's New Age Chemical Company Goes Public


Sir Richard Branson never stops thinking up new breakout ideas. His Virgin Group has over 400 companies, ranging from airlines to mobile phones to space tourism. The experimentation seems to have worked -- Branson himself is worth about $4 billion.

One of his companies, Gevo (GEVO), went public this week on Nasdaq. The firm sold 7.15 million shares at $15 each, which was at the high end of its estimated range of $13 to $15. On its first day of trading, the stock shot up about 16%.

A Viable Energy Alternative?

Gevo, based in Englewood, Colo., develops bio-based alternatives to petroleum products. It plans to produce isobutanol, which is an alcohol compound that can be used as a gasoline blendstock and for the production of plastics, rubber or polyesters.

Petrochemicals are products made from energy compounds, like coal, natural gas or fossil fuels. These sources have drawbacks, especially considering their impact on the environment. At the same time, crude oil is getting tougher to find.

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Isobutanol appears to be a viable alternative. Its costs tend to be less volatile, and it's environmentally friendly.

But there are some problems. Perhaps the toughest is the expense of building a new infrastructure. Gevo has hit on a smart approach to this -- leveraging the existing energy system. This means developing isobutanol to be used in existing ethanol plants, pipelines and refineries. And Gevo has put together a sophisticated system -- GIFT -- for this process. The result is a high-energy yield and a low cost, both critical for any alternative energy source.

And Gevo is getting traction. Already the company has received interest from potential customers like Lanxess, a top chemicals company and Total Petrochemicals USA.

No Hurry for Investors

While Gevo has a great business plan, it is far from foolproof. The retrofit process will not be easy. Plus, it will take time to get the petrochemicals industry interested in the new technology.

Even though Gevo was able to raise $107 million, that may not be enough. Keep in mind that since 2005, the company has sustained losses of $77 million.

Gevo won't launch its product until the first half of 2012, which means there's no need for investors to rush into this stock. As time goes by, there should be opportunities to get shares at a lower price.

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