Ethanol Is Here To Stay, VSUNQ Bounces Back - Up 50%
VeraSun Energy Corporation (OTC:VSUNQ) surged 50.00% up to $0.0195 on no news; however the ethanol industry received a significant boost last week from Barack Obama and a congressional rule implementing the mandated use of biofuel nationwide allowing at least an extra 2 billion gallons of corn ethanol to be produced and creating a gateway for much, much more. The US Government said the rule will increase farm income by $13 billion by 2022; reduce oil dependence by 328 million barrels per year and reduce greenhouse gases comparable to removing 27 million vehicles from the road. Furthermore the US EPA will review a decision to lift the blend rate of ethanol in regular gasoline from the existing 10 percent level to15 percent by mid-2010. The ethanol market was badly hit by the recession, due in some part to the declining price in gas and the credit crisis which lead many ethanol producers to go bankrupt. VSUNQ is trading above its 200 day moving average of $0.01146 and has gained 828% since the beginning of January. Based in Sioux Falls, South Dakota, VeraSun produces and markets ethanol and its co-products in the US. The company filed for bankruptcy protection last year and sold its corn-based ethanol plant in Hankinson, North Dakota for $92 million in October 2009. VeraSun’s ethanol co-products include wet and dry distiller grains, which are used as animal feed; and corn oil that is used as an animal feed, as well as to produce biodiesel. The company also markets VE85, an ethanol blended fuel through arrangements with gas distributors and retailers.
In November 2009 the company was named defendants in a class action lawsuit on behalf of its shareholders, which allege the company failed to disclose the true condition of its financial state, business and prospects. The complaint alleges that on September 16th, 2008, VeraSun announced a public offering of 20 million shares of common stock to raise money for “general corporate purposes”; however shareholders claim the purpose of the offering was to raise funds to compensate for the huge losses incurred from speculative trading on the price of corn. In effect on September 16, 2008, VSUNQ stock fell 70% to $3.81 from the previous close of $5.22 before the announcement, and closed at $1.41 on September 17, 2009.
Today’s ethanol gainers: Pacific Ethanol Inc (NASDAQ:PEIX), +$0.04, 2.73% up to $1.88; Aventine Renewable Energy Holdings, Inc. (OTC:AVRNQ), +0.010, 4.76% up to $0.220.
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