Print“Ceres, an energy crop company, priced its initial public offering on February 22 to become the first agricultural biotechnology company to go public on a U.S. exchange since Monsanto in 2000.”
Ceres, an energy crop company, priced its initial public offering on February 22 to become the first agricultural biotechnology company to go public on a U.S. exchange since Monsanto in 2000. Ceres raised $65 million through the offering, far less than the $110 million it sought to raise. The company sold 5 million shares at $13 per share and began trading on the Nasdaq Global Market under the ticker symbol CERE. Underwriters have a 30-day option to purchase an additional 750,000 shares.
Ceres develops and markets seeds for energy crops, such as sweet sorghum, switchgrass, and miscanthus, used the production of bio-based fuels and products. It joins six other U.S. biorenewables companies that have completed IPOs in the past two years. While Ceres had originally hoped to sell its shares for $21 to $23, it revised its range to $16 to $17 after starting its road show. But that range also proved too high and, after delaying its debut for a month, the company settled at $13 a share, 21 percent below the midpoint of its desired range.
Existing shareholders were expected to purchase up to 1 million shares of the offering, or 20 percent, according to a regulatory filing on February 17. In that filing, Ceres advised prospective investors of recent developments in its business.
“South-Central Brazil is currently undergoing a significant drought,” the company wrote. “As a result, agricultural production in the region is being adversely affected. We are receiving reports that while some of the 2011/2012 sweet sorghum crops being produced from our seeds are growing quite well, others are suffering from the adverse weather conditions. As a result, we expect that this drought will likely lead to overall reduced yields for the 2011/2012 sweet sorghum crops and may adversely affect the demand for our seeds for the 2012/13 growing season.”
The Ceres IPO comes at a difficult time for the nascent bioenergy sector. The average return since IPO for the six U.S. biorenewables companies that have gone public is down 36 percent. Amyris, once considered the poster child for the emerging sector, announced that it would not meet its production goals due to problems with consistency of yields of its renewable chemical, Biofene, in higher volumes. Its shares sank 29 percent on the news and were trading 65 percent below its IPO price in mid-February. [See story http://www.burrillreport.com/article-amyris_scales_back.html]
Codexis, a developer of enzymes used in the production of biofuels, biochemicals, and pharmaceuticals, has also encountered difficulties. Slow progress in the scale up of cellulosic biofuel production has affected the company’s bottom line. It abandoned its efforts to develop enzymes for carbon capture at coal-fired power plants and it has been has unable to get a foothold in the public market, where its shares have failed to reach or exceed its $13 IPO price. “We’re late to our own party,” long-time CEO and company founder Alan Shaw told Biofuels Digest in late 2011, before resigning on February 17, 2011 to pursue other interests. While Shaw will serve as a special advisor to the Codexis’ board, his resignation sent shares plummeting 19 percent to a new low of $3.70, the biggest drop in its history.
As with biotechnology in general, bioenergy companies come with significant risks. Still, a few days before Ceres’ pricing, blogger IPO Candy saw the discounted Ceres offering as a bargain. Writing on the website Seeking Alpha, he said: “There is a long road of execution in front of them [Ceres] but if they do it our estimate of intrinsic value of $65/share will be achievable. Monsanto is an investor in the company so it’s hard to see them going totally belly up.”
February 22, 2012
http://www.burrillreport.com/article-ceres_ipo_brings_in_65m.html
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