Green Brick Partners, Inc. (NASDAQ:GRBK)

CAPS Rating: 1 out of 5

The Company is considered development stage as its only asset is its investment in Energy LLC. The Company's plan is to become an ethanol producer in the United States.


Player Avatar TMFBlacknGold (98.68) Submitted: 12/19/2012 9:33:48 AM : Underperform Start Price: $4.61 GRBK Score: +29.48

I don't even know what number red thumb this is...3? 4? Now, while this company trades at a huge discount to book value (~0.4 price to book) I happen to know that doesn't matter. As a bioprocess engineer, I've seen plenty of ethanol producers go belly up and sell their assets at liquidation prices. These bankrupt (financially and engineering-ly) have no bargaining power. The big boys (BP, Shell, Renewable Energy Group, etc) know it and prey upon it. And why not?

The best example I know of was Shell's acquisition of the Fulton Ethanol plant in Fulton, NY, which currently supplies all biofuels for the Indy Series and even NASCAR. The company that owned the plant before had some pretty horrible designs (I've been inside the facility) that lead to contaminated batch after contaminated batch. This resulted in bankruptcy, grey hair, loss of bargaining chips, and ultimately a sale to Shell for some ridiculously low figure ($10-$15 million). Shell brings in its A-team, fixes the facility for about $20 million, and ramps up production capacity to 100 million gallons per year. The facility and adjacent property are now worth, what, $100+ million? Just a quick lesson on book value in the EtOH sector!

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