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by Michael Kanellos

Gevo (NASDAQ:GEVO)--which coaxes microbes to secrete a form of isobutanol but garners most of its revenue from corn ethanol--saw its stock rise from an opening price of $15 to $16.43 on the first day of trading.

The company sold off 7.15 million shares of its stock yesterday at the high end of the $13 to $15 range. The IPO raised close to $100 million for the company after fees. Last year, it had hoped to raise $150 million. The stock went as high as $17.53. Investors include Khosla Ventures and the Virgin Green Fund.

A ten percent rise will no doubt make some critics sniff once again that green tech has yet to produce a Google. (Generally, the critics also missed out on Google (NASDAQ:GOOG) too, but who is counting?) Still, the moderate increase could be a good sign. Last year, Amyris (NASDAQ:AMRS), which gets genetically modified microbes to generate hydrocarbons, sold stock for $16 a share. It rose to $17 on the first day of trading, but now it sells for close to $31 a share, a spike driven by interest in its industrial lubricants.

Molycorp (NYSE:MCP) went public at $13 and sank. After the Chinese threatened to throttle the export of rare earth minerals, the stock quadrupled.

By contrast, A123 Systems (AONE) saw its stock zoom after the IPO in late 2009. Now, it trades below its opening price.

What is Gevo? It's a promise more than anything else. The company's scientists are working on genetically modified microbes that eat sugars and secrete isobutanol, a popular industrial chemical used in diesel, gas, plastics, lubricants and jet fuel. Jet fuel commands a healthy price and the demand for clean alternatives is pressing. Regulations are forcing commercial airlines to reduce their carbon footprints and the Department of Defense has laid down directives to reduce their dependence on fuel imports. The microbes produce a single, consistent molecule. 40 billion gallons of isobutanol and its derivatives get consumed a year.

"Aviation fuel is the one market where it is difficult to believe there is any other alternative" like batteries to traditional fossil fuels, said Nat Goldhaber of Claremont Creek Ventures in a separate, non-Gevo related interview.

Gevo can also make its bio-isobutanol in retrofitted ethanol plants. The company, in fact, has been sniffing around for mothballed ethanol plants at a discount since 2009, Anup Jacob, at investor Virgin Green Fund, told us.

The downsides? Gevo feeds its genetically enhanced microbes sugar to produce the desired chemicals via fermentation. Sugars fluctuate in price although it may be able in the future to take advantage of cellulosic sugars from forest and farming waste. Also, biological processes can cost more than traditional thermochemical processes.

More importantly, Gevo is also not growing because of the strength of its microbes. Revenue jumped from $660,000 in 2009 to over $32.7 million in 2010, but that's because it acquired Agri-Energy, a traditional ethanol producer, and began to buy and sell ethanol. The vast bulk of its 2010 revenue--$31.5 million--came from selling corn ethanol while its cost of goods sold that year came to $28.9 million. In other words, most of the revenue got absorbed in wash-like transactions.

In fact, Gevo only gets $138,000 from technology licensing, far less than the $1.2 million it gets from grants. One could even argue that Gevo is really an old time ethanol company with an intriguing science project that could bear fruit someday.

It has also consistently reported losses. In all, it has lost $78 million.

Then again, Amyris had the same sort of corn-fed IPO: most of its early revenues have come from ethanol sales.

Disclosure: No position

Source: Gevo Stock Gets a Bit of a Pop in IPO