Xethanol: Trading on Its Name Only

Aug.30.06 | About: Xethanol Corporation (XNL)

The fact is that Xethanol (XNL) has yet to prove itself capable of operating profitably. It does not even appear to be moving in that direction. The net loss of $5.9 million in Q2 is ridiculous considering the 21% gross profit. The explanation for this loss tells us a lot about the nature of XNL:

Included in the current quarter net loss were non-cash charges totaling approximately $5.6 million. Non-cash charges consisted primarily of equity compensation and other equity related expenses.
(Q2 2006 Quarterly report)

$5.6 million of equity compensation in a quarter with $3.2 million in revenue? When we pair this with what a financial analyst writing for MotleyFool.com suggested last month, that the company has repeatedly changed its name and business to match the current trend, it becomes obvious that this is not a normal company.

The overwhelming evidence supports the accusations that XNL exists solely so that insiders can sell their stock off and acquire more to enrich themselves. They do this with no intention of creating a successful enterprise. If and when ethanol grows into a mature industry, some companies will expand rapidly, and many will go under, it is obvious that not even the management of XNL expects it to succeed.

Related: See Sharesleuth's writeup of Xethanol.


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