VeraSun Suspends Equity Offering, Retains Morgan Stanley to Advise on Strategic Alternatives
19 September 2008
Two days after it began a public offering of 20,000,000 shares of its common stock, major ethanol producer VeraSun suspended the equity offering and announced that it had retained Morgan Stanley to act in an advisory capacity to evaluate strategic alternatives based on “strategic interest” expressed by multiple parties.
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| VeraSun stock price, 2 January - 18 September 2008. Click to enlarge |
VeraSun, whose stock has been steadily declining, saw its share price fall off a cliff on Wednesday after it said that corn prices had driven its third-quarter expectations down to a loss. VeraSun (VSE) closed Wednesday at $1.41. At its high in 2006, it traded at $28.10.
The company, like other corn ethanol producers, has been hurt financially by rising corn costs. Earlier this year, the company said it would delay openings of some production plants until market conditions improved.
In 2007, VeraSun Energy Corp. and US BioEnergy Corp. entered into a definitive merger agreement. By the end of 2008, the company had expected to have a total production capacity of more than 1.6 billion gallons per year (BGY). At that size, assuming projected facilities come on line on time, the new VeraSun would have edged past ADM by the end of 2008 as the largest ethanol producer in the US. (Earlier post.)
"The company, like other corn ethanol producers, has been hurt financially by rising corn costs. Earlier this year, the company said it would delay openings of some production plants until market conditions improved."
This suggests that rising food prices are being driven up by rising fossil fuel costs.
If corn prices were being pulled up by increasing demand from ethanol plants, the ethanol plants would be making large profits.
Sounds like the PR firms acting for the oil companies were misleading the public when they tried to shift the blame for rising food prices onto biofuels.
Older readers will remember the same PR firms acting for the tobacco companies telling us that smoking does not cause cancer.
Posted by: Polly | 19 September 2008 at 08:47 AM
I read the consensus on food prices was that maybe half of the price increase of corn could be traced to ethanol. The other link was made that if the acreage is in corn for ethanol then it is not in wheat or other grains, so the prices for those went up. Maybe and maybe not, I have not seen the data to support those claims.
If we can get to cellulose ethanol ASAP, then the debate goes away. We can spend $700B bailing out Wall Street banks, but not even 1/1000th of that building bio fuels plants. I would say our priorities are a bit clouded to say the least.
Posted by: sjc | 23 September 2008 at 02:25 PM