Friday, April 30, 2010

Codexis IPO Bodes Well for Cleantech

On Earth Day, biofuel firm Codexis Inc (CDXS) became the first green initial public offering (IPO) this year and this bodes well for other clean technology (cleantech) firms. Last year the initial public offering of lithium-ion battery maker A123 Systems (AONE) spiked share prices by 50 percent and forced investors to take notice of green IPOs.

Codexis was incorporated on January 2002 and they focus on biocatalyst development efforts in markets which include pharmaceuticals and biofuels. Enzymes developed by Codexis make industrial processes cleaner and faster. They are also pursuing funded collaborations in several other bio-industrial markets including carbon management, water treatment and chemicals.

On the day the Codexis IPO went public, (Thursday, April 22), Codexis raised $78 million by selling 6 million shares for $13 each. Shares of Codexis went up 2 percent on Thursday to close at $13.26, then rose to $14.04 on Friday, before falling to 13.50 a week later (as of the close on Thursday, April 29).

Although Codexis received a mixed response from investors, this may be due to several factors including the fact that the company has yet to earn a profit. It may also be due to the type of technology Codexis is involved with rather than an indictment of cleantech IPOs. Biofuels have questionable efficacy due to their effect on global food supplies as well as their emissions profile. Compared to other cleantech sectors like wind and solar, biofuels have major disadvantages.

However, analysts are saying that the fact that it was able get a deal done at all is a positive sign for the green sector. "It's a very bullish and positive signal," said Sheeraz Haji, President of Cleantech Group, which tracks the green market. "It got out at a valuation that was acceptable. It signals that there is a hunger in public equity investors for cleantech IPOs."

Matt Therian, analyst with Connecticut-based Renaissance Capital said, "Codexis getting a deal done shows that there is demand for cleantech IPOs," he said. "There is risk appetite out there."

Some of the companies that postponed their IPOs earlier this year are once again planning to enter the market. In Februrary 2010, Chinese solar company JinkoSolar put its IPO plans on hold, a couple of months later they amended their regulatory filings in preparation to go public.

"You have a lot of good companies just sort of sitting on the sidelines waiting to go public," said Josh Lerner, investment banking professor at Harvard Business School. The venture pipeline is "the strongest it has been in years," he said.

Some of the green IPOs expected later this year include well known electric car maker Tesla Motors, solar company Solyndra and smart grid firm Silver Spring Networks. Many are expecting that green IPOs will see tremendous growth.
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