- Summary: Two ethanol production companies, Hawkeye Holdings Inc. and US BioEnergy Corp. are planning to go public between now and year's end despite the poor faring of other ethanol IPOs this year. Hawkeye will be the third ethanol IPO to take a shot at the market this year, coming after months of lackluster performances by the first two. VeraSun Energy Corp. (VSE) went public in mid-June and quickly gained 30% but hasn't seen such prices since August while Aventine Renewable Energy Holdings Inc. (AVR) floated an IPO and immediately went into freefall. AVR has yet to recover its initial IPO price of $43. Investors have become more cautious, says Rob Wilder, chief executive of California-based WilderShares LLC, creator of the WilderHill Clean Energy Index ETF (NYSEARCA:PBW). Ethanol is expensive to transport, cars get lower mileage on it than from gasoline, and it isn't clear how difficult it will be to shift from the U.S.'s primary ethanol source of corn to alternative crops like switchgrass. "There are all these very real problems with ethanol," says Mr. Wilder, whose index tracks about 40 publicly traded companies that focus on alternative energy and energy efficiency. "The sector became too frothy, and the valuations were not realistic."
- Comment on related stocks/ETFs: With all the buzz surrounding high energy prices, the "ethanol solution" has received high praise as well as criticism. The Stalwart believes Ethanol is all hype with very little real upside to be had. Market Participant is equally bearish on the ethanol market's prospects. Dan Carty is more bullish on Ethanol seeing an upside both for ethanol producers and for corn growers as ethanol demand surges.
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