Gevo Shares Rip Higher For Second Day In A Row

The Gevo, Inc. GEVO train kept rolling Tuesday, with the stock up another 77 percent following an update on its listing status from the Nasdaq.

What Happened

A day after Gevo stock skyrocketed 261 percent, the stock was trading up Tuesday after Nasdaq informed the company it has regained listing compliance for minimum share price.

The major news this week for Gevo came on Monday when the Environmental Protection Agency approved up to a 16 percent blend of isobutanol for use in automobiles. Prior to Monday’s decision, isobutanol, which as a biofuel derived from renewable resources such as corn, was previously only allowed to be blended with gasoline at a concentration of up to 12.5 percent.

Why It’s Important

Maintaining listings on major exchanges is an important part of the credibility for micro-cap stocks such as Gevo. Micro-cap stocks get limited media coverage and their operations aren't as well-known as larger companies. Public companies that don't trade on major exchanges are often considered to be much more of a financial risk for investors and their accounting is considered to be much less reliable.

Companies who fall below the Nasdaq’s minimum share price requirement of $1.00 often choose to perform potentially dilutive reverse stock splits to maintain their listings, another red flag for investors. However, this week’s big move has ensured Gevo will not need to face that type of difficult decision in the near-term.

What’s Next

Now that a potential delisting or reverse split seems to be off the table for Gevo, traders will be watching closely to see how much of this week’s news is sustainable gains based on the isobutanol news and how much of it is a result of short-term market dynamics and Gevo’s minuscule 1.0 million-share public float.

Gevo shares will likely settle into a much less volatile trading range once trading volume dies back down to normal levels, but exactly where the share price will ultimately settle is nearly impossible to predict at this point. The stock traded around $22.32 at time of publication.

Related Links:

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Posted In: NewsMoversTrading IdeasisobutanolLow Float
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