Gevo (NASDAQ:GEVO) stock is in the spotlight after the company announced a new sales agreement with Japan Airlines (OTCMKTS:JAPSY). While this is wholly a positive development, Gevo announced yesterday that it would initiate a $150 million direct offering.
As part of the offering, the company has entered into agreements with several institutional investors for the sale and purchase of 33,333,336 shares of common stock. Gevo has priced the common stock at $4.50. The chemicals company will also offer accompanying warrants to purchase 33,333,336 additional shares of common stock. These warrants carry an exercise price of $4.37 and will expire five years after issuance. In addition, purchasers can immediately exercise the warrants, while the offering will close “on or about June 8, 2022.”
As a result of the offering, shares of GEVO stock closed lower by 33% yesterday. Year-to-date, Gevo has lost more than 35% of its market capitalization. With that in mind, let’s get into the details of the JAL agreement.
GEVO Stock: Gevo Enters Into Agreement With JAL
Japan Airlines will purchase 5.3 million gallons of sustainable aviation fuel (SAF) from Gevo for five years. However, deliveries are set to begin in 2027, so there will be no immediate changes to Gevo’s finances. JAL is also a member of the Oneworld Alliance, and the purchase falls within an agreement that Gevo made with Oneworld last March. The agreement states that Oneworld will purchase up to 200 million gallons of SAF from Gevo. Furthermore, the agreement will help Gevo pursue its goal of commercializing a billion gallons of SAF by 2030.
Gevo CEO Dr. Patrick R. Gruber added:
Our sustainable aviation fuel is a drop-in fuel that delivers renewable energy where it’s needed. Our process is a model of efficiency, designed to allow the same acre of farmland to produce SAF from corn using atmospheric carbon while simultaneously adding high-value nutritional products to the food chain.
Gevo is all-in on zero-emissions energy. The company’s Net-Zero business seeks to reduce greenhouse-gas emissions to net-zero “over the entire lifecycle of each gallon of advanced renewable fuel produced.”
Furthermore, investors should note that the agreement with JAL is conditional. One of these conditions is that Gevo must finance and develop at least one production facility to produce the SAF outlined in the agreement.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
