Market Overview

Gevo Skyrockets Following EPA Isobutanol Decision

Gevo Skyrockets Following EPA Isobutanol Decision

Shares of biofuel stock Gevo, Inc. (NASDAQ: GEVO) skyrocketed more than 320 percent on Monday following big news from the Environmental Protection Agency.

What Happened

The EPA 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

Isobutanol producer Genvo says the ruling is good news for business and for drivers.

“We all benefit. 16% blend levels allow more RINS per gallon, high octane, and many other benefits,” CEO Patrick Gruber said in a statement. The 16 percent gasoline blend had previously only been allowed for boats and off-road applications.

Following the announcement, Genvo stock exploded higher on massive volume, triggering multiple trading halts on Monday. The microcap sock has a float of just 1.0 million, according to Yahoo Finance. As of around 2:00 p.m. EST, Genvo’s trading volume was up to 22.7 million on the day compared to its three-month daily average volume of only about 177,000.

Stocks with such low floats tend to experience tremendous volatility when a large amount of volume is dumped into the market because there are few or no shares available to short sell to counter the large moves to the upside. Yahoo reports that Gevo has about 60,300 shares held short, or about 5.3 percent of its float.

What’s Next

Traders will likely choose to take profits on the huge move at some point. Even after Monday’s move, Gevo stock has been a definitive victory for short sellers in the longer term. The stock is down more than 99 percent in the past three years.

At time of publication, the stock was trading around $13.

Related Links:

Even Carver Bancorp Can't Explain The Stock's 260% Rise

Low-Float, Heavily-Shorted Stocks Are The Volatility Play Right Now

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