Tristan R. Brown
Alternative energy, long/short equity, commodities, energy

REGI And The Dangers Of Making Regulatory Assumptions

Executive summary

The recent leak of an EPA proposed rule suggests that the RFS2's volumetric mandates in 2014 will be significantly reduced from their original levels. This caps a 3-month period that has seen RIN prices collapse, reducing a major driver of biofuel demand. While I originally expected the share price of biodiesel producer REGI to increase by 150% or more by the end of 2014 due to the impending arrival of the ethanol blend wall and the company's unique ability to get around it, I am reducing my price target to $15.68 due to the impact that the proposed reduced volumetric mandates will have on REGI's earnings if they remain unchanged in the final rule. Due to the recent...
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