Renewable Energy, 1st US IPO Of 2012, Prices Below Range

The first U.S. initial public offering of the new year priced below its expected range Wednesday night, with biofuel company Renewable Energy Group Inc. selling 7.2 million shares of its common stock at $10 a share.

The Ames, Iowa-based company had aimed to sell its shares at $13 to $15 apiece. The stock begins trading Thursday on the Nasdaq under the symbol "REGI."

Renewable Energy is the first IPO to come out in the U.S. in 2012, but its difficulty pricing doesn't mean other deals lined up to debut in the weeks ahead will run into the same resistance. Other biofuel and renewable fuel companies that came public in the past year -- Gevo Inc. (GEVO), KiOR Inc. (KIOR) and Solazyme Inc. (SZYM) -- are trading well below their IPO prices, which likely weighed on Renewable's valuation. Stocks scheduled to trade last week include two tech deals, an industry which has fared better with IPO investors than biofuels.

Although it didn't command the price it wanted, Renewable Energy still could go on to trade well on its first day, if investors feel that the risks associated with its industry have been adequately discounted in the IPO price.

Renewable Energy claims to be the largest producer of biodiesel in the U.S., based on gallons made. It uses low cost feedstocks to create the fuel, such as inedible animal fat, used cooking oil, and inedible corn oil. In the first nine months of 2011, total revenue nearly quadrupled to $557 million compared to the same period a year earlier, but its loss widened to $27 million from $25 million in the 2010 period.

One caution for biofuel investors is the excess production capacity among biodiesel plants in the U.S. currently, with many plants not operating or running at reduced capacity. The annual production capacity of plants that have already been built and plants under construction is higher than both historic U.S. consumption of biodiesel and the future requirements for consumption under a federal regulation.

Renewable Energy's offering was managed by UBS AG (UBS) and Piper Jaffray Cos. (PJC).

-By Lynn Cowan; 301-270-0323; [e-mail]