This entry continues a series on companies I sold as part of a portfolio cleanup prompted by the mess on Wall Street. In the first entry I described what I plan to do with the cash, followed by the reasons why I sold Carmanah Technologies and Pacific Ethanol. UQM Technologies was one I didn’t sell.
I have not mentioned Dynamotive Energy Systems (DYMTF) before. I have mixed feelings about the company. They use fast pyrolysis to make cellulosic biofuels, which I believe will prove to be one of the more economic pathways to cellulosic biofuels. However, I believe that cellulosic biofuels are not usually the best use of limited biomass. Rather, I have argued that cellulosic biomass can be more profitably used to displace coal in electricity generation, or to displace corn in feed for livestock. Nevertheless, there is a strong regulatory and popular push towards cellulosic biofuels, which led to my speculation on Dynamotive last year.
According to the company’s Q2 2008 financial statements, they had $1.3M in current assets, $9.5M in current liabilities, and a three month operating cash flow of -$341K. They’ve been funding their deficit with short term loans and new share issues, a process which I expect will become much more difficult in the current financial environment, with negative implications for the share price.
DISCLOSURE: No position.
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