Rentech (AMEX://www.google.com/finance?q=rtk" target="_blank">RTK) is surprising its investors with a huge share price surge this week. The spike comes on the news that the company may be ready to explode into a huge market.
It is good to see one of my old followings in the news this week. Sure, it has taken several years for the company to do anything remotely strategically oriented, but it is better now than never.
I first started tracking Rentech (AMEX:RTK) in 2005 during the first leg of the nation’s latest alternative-energy boom. As speculation about the company’s Fischer-Tropsch technology grew by the minute, shares of the tiny firm surged. The investors that timed it perfectly had a shot at gains of 400% or more.
Gains on speculation typically are not sustainable. Eventually the company has to produce results. Rentech was far from successful in that department.
That is until Wednesday of this week when the company announced news that would send shares up by as much as 85%. For investors that had given up on the speculative penny stock, it was a sharp wake-up call.
The sudden surge in the company’s value comes from a breakthrough in the aviation industry. A committee at the standards-creating agency ASTM unanimously approved a measure that would allow commercial aviation jet fuel to contain up to 50% synthetic Fischer-Tropsch fuel.
The news means Rentech’s synthetic fuel, RenJet, now has a shot as a player in a very big industry.
If you are not familiar with the kind of technology Rentech is using, Fischer-Tropsch is a process that takes gas from coal, coke, even biomass and turns it into a liquid hydrocarbon product, like jet fuel, diesel or naptha.
It is old technology (the Nazis used it) that was historically too expensive to be considered profitable. But now with higher energy prices and lower input prices, Fischer-Tropsch is slowly making its way into the mainstream.
Succeeding where nobody else ever has
With the market wide open, Rentech chief focus must be to take its product from a demonstration stage to a production stage. The key variable, of course, is whether the company can do it with any sort of profit margin.
After shares soared earlier in the week, they have since dropped significantly. As I write, investors are buying shares at a 12% discount to yesterday’s closing price.
Folks interested in the company should focus on Rentech’s upcoming earnings figures on August 11. With liquidity a major variable going forward, you can bet the Street will focus on cash flows and balance-sheet improvements.
If word is positive from the company’s executives this week’s action could be a strong foreshadowing of good things to come. If done well, Fischer-Tropsch technology could be the transitive fuel source this country needs as it seeks its energy independence.
Source: Rentech: Getting Ready to Fuel an Industry
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