The ethanol industry appears poised for another big year in 2007, as companies scramble to take advantage of continuing government subsidies and a growing political desire to reduce the country’s dependence on foreign oil.
But Wall Street investors who went pedal-to-the-metal during ethanol’s midyear IPO frenzy seem to be easing off the accelerator upon warnings of volatile commodity prices and a potential oversupply down the road.
VeraSun Energy Corp. and Aventine Renewable Energy Holdings Inc., the country’s second- and fourth-largest ethanol producers, respectively, went public in June amid perfect market conditions. Corn was cheap, gas cost a bundle and refiners were clamoring for more ethanol to use as a cleaner-burning alternative to the additive MTBE.
But autumn brought falling gas prices, and ethanol companies saw their stock prices drop by more than 40 percent.
The deteriorating market conditions also prompted the US’s third largest ethanol producer, Iowa-based Hawkeye Holdings Inc., to postpone its planned IPO, writes Bismarc Tribune. Link