Tuesday, May 07, 2013

Long Awaited 'Bio' IPO

The common stock offering of biochemical producer BioAmber, Inc. is expected to be priced this week.   The company first filed for its initial public offering back in November 2011, but unlike another biochemical developer Genomatica, which pulled its IPO, BioAmber has persevered.  If the deal gets done, the stock will trade on the Nasdaq National Market with the symbol BIOA.

Previous pricing talk had been for an offering price near $15.00 to $16.00 per share.  However, BioAmber has had to sweeten the deal with a half warrant for each share of common stock.   So the offering is now 8.0 million shares  of common stock and 4.0 million warrants.

BioAmber has been trying to dazzle investors with a long list of potential uses for its bio-succinic acid  -  plastics, polyurethanes, coatings and fragrances, to name just a few.  Most investors have probably never heard of it.  A white, odorless solid is composed of carbon (4 molecules), hydrogen (five of those) and oxygen (four more).  It is sometimes called the spirit of amber, providing an insight into how the company found its corporate moniker.  It came by that simple name because succinic acid was origianally obtained from amber.   As used for succinic acid expanded producers turned to hydrogenation of maleic acid and oxidation of butanediol. 

Succinic acid can also be created as a byproduct of the fermentation of sugar.  What is more all those carbon, hydrogen and oxygen molecules strung together just right are a precursor to polyesters.  BioAmber and a few others have identified a very large market for bioplastics and biochemicals and propose to produce ‘renewable’ succinic acid using the fermentation alternative.  The trip from the cane field to sugar to plastic and back to the field at least makes for great press for any participant in that supply chain, if not real progress in reducing petroleum content in the supply chain and all the attendant environmental effects.

BioAmber will not go into production until 2014 when it expects to have completed a production facility in Sarnia, Ontario that is to have a 30,000 metric ton capacity.  The Company will join several others in the bio-succinic acid market:  a partnership between Royal DSM and Roquette Freres, the BASF and Purac joint venture and Kawasaki Kasei Chemicals.  Myriant Corporation is also trying to get a foothold in succinic acid.  BioAmber will have a bit of catching up to do.  Myriant recently signed a distribution agreements with BCD Chemie and Bayegan Group covering parts of the European, Middle East and African markets.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.


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