Two Biofuels Stocks Propose Share Offerings in Preparation for Growth Spurts

Michael Teague  |

Shares for US biofuels producer Solayzme Inc. (SZYM) gapped down at Wednesday’s open and continued in that direction with significant momentum following the biofuel producer’s announcement of a proposed offering of common stock and convertible notes during the previous day’s aftermarket session.

After closing at just over $13, Solayzme became the second biofuel producer of the day to dilute shares in order to raise cash, after MagneGas Corporation (MNGA) , a Florida-based company that turns waste water from various industrial and commercial uses into clean-burning gas, said that it would issue 2 million new shares of common stock and Series C convertible stock for some $5 million in gross proceed.

But while MagneGas was recuperating some of the nearly 30 percent its shares lost during Wednesday’s session, the market wasn’t as kind with Solayzme, whose offering will consist of 5.75 million shares of common stock along with $115 million of convertible senior notes due in 2019.

Still, the price action in both cases was most likely the result of the market adjusting to the stock’s dilution. Though both companies work in biofuels, they produce fairly different products, and both appear to be trying to raise cash in preparation for a growth spurt.

Solayzme  is scheduled to open its first commercial facilities this year, and followed up its offering proposal on Wednesday by introducing a brand new lubricant product for oil and gas drillers. Encapso is a biodegradable and encapsulated targeted delivery oil that has already shown great promise in testing, and for which there could be an enormous market in the US’s many horizontal drilling wells.

On Monday, MagneGas CEO Ermanno Santilli made his appearance in Orlando at the 7th annual Biomass Conference and Expo as promised, to unveil the company’s new mobile unit for turning liquid waste into hydrogen-based fuel that it recently completed for a client in the Central Asian nation of Kazakhstan. The company has also tested the product at a sewage treatment facility in Italy, and Santilli promised conference attendees that a pilot program for the agricultural sector in the US was in MagneGas’s “very near future”.

The stock turned heads last week when shares soared 60 percent in the Friday session after the announcement that it had received four contracts for its fuel, destined for demolition projects in the Northeastern US.

Shares for Solayzme were down 11 percent to $11.60 a piece, while MagneGas was gaining steam ahead of the closing bell on gains of nearly 5 percent to $1.61.

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