Going Public

By Ron Kotrba | August 15, 2011

The largest U.S. biodiesel company, Renewable Energy Group, filed for its IPO to go public in July. REG holds five wholly owned biodiesel production facilities and one leased plant, with a total production capacity of 212 million gallons.


What does it mean for the industry when the nation’s largest biodiesel producer goes public? And what does it say about REG’s financial status right now? I asked these questions on my F.A.M.E. Forum blog, shortly after the announcement, along with this perspective.

 
In a broad sense, one school of thought is that stock exchanges, and the public’s ability to buy and sell company shares, is the democratization of capital. Those who oppose this viewpoint insist this is only an illusion, since often only a minority of any public company’s stock is offered for common purchase, with the majority retained by the few corporate elite. In its SEC filing, REG states, “We have led the consolidation of the U.S. biodiesel industry.” Consolidation is generally considered to be incongruent with democratization. The biodiesel industry is rife with localized, small, private production facilities, and larger private companies, which is a fairly good representation of what a diverse, decentralized fuel industry should be. Some would say that is democratic.


Peter Brown, the September issue’s Talking Point columnist, had this to say in response to my blog: “They still have shares to put out there to be bought by the great unwashed in a market that the unwashed does not yet understand. Risky? Probably far more than anyone realizes. A gamble?

Probably not because the company now has solid assets to back its worth. Whoever buys its shares will be buying contracts, the start of an acceptable business and contacts around the world. So yes, it is a democratization process and in a very real sense an educational process for the above mentioned unwashed. As far as the regional biodiesel facility sucking off waste oil from the local McDonalds is concerned, that image is over. What we have are feedstock contracts negotiated in India and Ghana for jatropha oils that will be converted to biodiesel to allow KLM to fly to Dusseldorf. That is the real world of REG at this point in time, and that will become the reality of the biodiesel business.”

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