Ipo Analysis

Renewable Energy Group |

Initial Public Offering - IPO |

Renewable Energy Group, Inc. is the largest producer of biodiesel in the United States. “Biodiesel is a form of diesel fuel manufactured from vegetable oils, animal fats, or recycled restaurant greases. It is safe, biodegradable, and produces less air pollutants than petroleum-based diesel “ (www.fueleconomy.gov).

The company has six plants in the U.S. sold approximately 148 million gallons of biodiesel fuel in 2011 which make up approximately 22% of the market for this fuel. Growth was heavy in 2010 due the acquisition of four companies. These acquisitions will make it possible to produce of 210M gallons of biodiesel fuel per year. New legislation RFS52, The Expanded Renewable Fuel Standard, became effective July 1, 2010 which required “Obligated Parties to use 800 million gallons in 2011 and at least one billion gallon in 2012” with new proposal on the table to increase this requirement to 1.28 billion gallons in 2013 (www.nasdaq.com). The IPO was priced on 1/19/2012 on the Nasdaq National Market under the ticker REGI.

Financial Information

(NOTE: All the financial information for this paper was retrieved from the company website, www. Regi.com.)

Highlights of the first quarter financial are product produced was up 95% which resulted in a 69% increase in gallons sold. Revenue from these sales increased 80% compared to the first quarter of 2011 which includes a 109% increase in operating revenue. The increase in operation revenue was a result of increase efficiencies at operating plants, new legislation RFS52 which increased demand for biodiesel fuel. In addition, higher petroleum and diesel fuel prices along with lower feedstock prices contributed to the larger increases in sales. Adjusted EBITDA was 12.7 million, up 140% from the same time period last year.

Balance Sheet Analysis

The first quarter balance sheet show a significant drop in variable interest entities in relation to...