Gevo (GEVO) Stock: The Good, The Bad, And The Potential Opportunity

Gevo Inc GEVO Stock News

Gevo Inc (NASDAQ: GEVO) has been on my radar for years. The company developed a way to produce clean fuels, and is starting to make waves. However, the company announced that it signed a massive agreement and is raising quite a bit of funds last week, leading to the ultimate argument between the bulls and the bears. So, what’s the deal, will GEVO stock fly from here or is it destined for losses?

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The Good News For GEVO Stock

There’s quite a bit of good news for Gevo investors. The company’s work to develop and distribute clean fuels seems to be paying off. As mentioned above, last week, the company announced that it entered into a massive agreement.

The agreement, signed with Trafigura Trading, a wholly owned subsidiary of Trafigura Group, is a long-term one that has the potential to generate revenues of $1.5 billion. Under the agreement, Trafigura will be purchasing massive amounts of the company’s clean fuels, setting the stage for further expansion of the product and consumer awareness.

This bodes well for the argument that GEVO is an important player given the current times. The fact of the matter is that the burning of fossil fuels is dangerous for the environment, and the world is taking notice.

As a result, there are measures being taken around the globe to reduce the carbon footprint of the human population. Gevo falls right in line with these goals. With the production of clean fuels, the company’s products are likely to see stronger and stronger demand for years, or even decades to come.

The Bad News From Gevo

While news that the company signed on a customer that has the potential to drive billions in revenue is great, but it was followed up with some painful news. The company is raising $50 million in a public offering that dilutes current shareholders.

To raise the funds, GEVO will issue more than 38 million shares of common stock. That’s a huge chunk that will eat at the value of shares currently held by investors. The fact of the matter is that fund raises are never fun, and this one is particularly painful.

The Opportunity

While the GEVO fund raise is painful for current shareholders, the fact of the matter is that it was necessary. With the new agreement comes new responsibilities that will ultimately lead to a need for funding. So, while the dilution is painful, sometimes necessary evils must take place to generate growth.

In the long run, I see GEVO stock as a tremendous opportunity. Again, the world is pushing to reduce the human population’s carbon footprint. Of course, creating and distributing clean fuels has the potential to do just that.

Moreover, for those that don’t believe that clean fuels will take off, just take a look at the $1.5 billion+ contract the company just signed. The fact of the matter is that clean fuels, along with solar, wind, water, and fuel cell energy are the energy of the future. GEVO has been on the cutting edge of this trend for some time, and while innovation and expansion is expensive, the end result has the potential to be a massive win for those holding the stock.

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