Share price of KiOR, Inc. , has been on the rise since it was committed $50 million from Silicon Valley venture capitalist, Vinod Khosla. The operator of the first North American commercial-scale cellulosic biofuel facility was promised the fund to double the capacity at its biofuels production facility in Columbus, Mississippi.
Following the vote of confidence from Khosla, whose private equity firm Khosla Ventures LLC holds approximately 26% stake in KiOR, prices soared through the roof. As a result, the stock shot up 57.9% (or $1.06) on Thursday to close at $2.89. Also, the traded volume of more than 8.6 million represents a whopping 1,311.2% increase over its 65-day average volume.
The wheels were set in motion on Sep 26, when KiOR announced its plans to double production capacity at its Columbus, Mississippi, cellulosic fuels facility by constructing the second plant. Per company estimates, the $225 million project – christened Columbus II – will take approximately 18 months of gestation period. The new facility is another step forward in KiOR’s long-term goal of raising its annual capacity to 92 gallons.
The move comes at the most opportune moment for KiOR which has lost more than half of its market capitalization year-to-date. After a lackluster IPO in Jun 2011, the company opened its first facility in Oct the following year. As of now, the Columbus facility has an annual installed capacity of 13 million gallons of transportation fuel sourced from wood waste and non-food crops. The planned Columbus II facility will spike this to 26 million gallons annualized.
The cascade in share prices started after the company posted weak production numbers for the second quarter of 2013 in August. The company was able to ship only about 75,000 gallons versus its targeted 500,000 gallons.
With Khosla throwing its hat into the ring for Columbus II, we believe that raising the rest of the greenbacks for Columbus II is going to be a straightforward affair. Our bullishness is enforced by the recent enthusiastic market response for a privately held biofuel developer, Cool Planet Energy Systems Inc. Cool Planet’s foray for funds was met with enthusiastic responses from big energy players like BP plc (BP - Analyst Report) and ConocoPhillips (COP - Analyst Report) .
Kior currently carries a Zacks Rank #3 (Hold). However, biofuel stocks such as Green Plains Renewable Energy, Inc. (GPRE - Snapshot Report) , carrying a Zacks Rank #1 (Strong Buy), warrant a look.