Gevo Investment Thesis

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A quote from Gevo’s January business update:

Gevo has developed potentially disruptive new technologies that use ethanol as a feedstock for the production of hydrocarbons, renewable hydrogen, and other chemical intermediates, to augment its use of isobutanol as a feedstock for the alcohol-to-hydrocarbons business. . . Gevo is seeing enhanced interest in its alcohol-to-hydrocarbons business from potential strategic partners and is looking at multiple ways of monetizing this aspect of the business. . . [Gevo plans on] establishing multiple new strategic partnerships to accelerate the development of its hydrocarbons business, inclusive of Gevo’s new ethanol-to-hydrocarbons technologies.

A few weeks after this update, Andy Marsh, CEO of Plug Power (a company that needs a better, cheaper way to produce hydrogen) gets appointed to Gevo’s board of directors. Plug could obviously benefit from a strategic partnership with Gevo, so it’s not too farfetched to believe that this is the real reason why Marsh joined the board.

This is Andy Marsh’s first gig serving on multiple boards at one time. Every move Marsh has made while at Plug Power has been made with great calculation and precision. He isn’t known to show his hand without an impending end-goal in sight. Being on Gevo’s board gives him insight into their alcohol to hydrocarbons technology, which is currently drawing interest for its hydrogen-producing capabilities. And Plug is making it obvious that cheaper hydrogen generation is their largest goal, so this partnership could make sense. Gevo is a struggling company at the moment, so it would be smart for Plug to license or purchase their technology while it is relatively cheap.

So, for Gevo, my primary thesis is short: Andy Marsh and their hydrogen-producing alcohol-to-hydrocarbons technology. If Gevo sells-off this aspect of their company, I will likely sell my position in Gevo.

I also have a smaller, secondary thesis point, though, and it surrounds Gevo’s budding isobutanol technology. Their isobutanol mixes well with existing fossil-fuels, making it possible to produce cleaner, more renewable fuels without much effort. Isobutanol’s use as a drop-in, turnkey addition to existing fuels makes the substance desirable for licensees who want a quick and easy way to clean-up their fuels and their image. Customers can quickly work towards their renewable energy goals without needing to modify their existing technology.

This secondary thesis-point is a small percentage of my overall thesis for now. However, I will closely monitor this aspect of Gevo’s business over the coming months and decide whether or not it deserves to become a larger percentage of my thesis.

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