Genius Investor Dumps BlueFire Ethanol Fuels

Yesterday morning’s Clean Technology Insight contains a tidbit on BlueFire Ethanol Fuels, a publicly-traded ethanol startup. Quercus Trust, one of its investors, is dumping shares in the company at a loss, according to CTI.

Ethanol companies have been hit hard by the recession, but BlueFire is step further down the technology chain: it’s a cellulosic ethanol company. For practical purposes, you can just translate that to “doesn’t have a product.” A number of cellulosic companies have started in the past few years, but none have yet completed their plants, at least in the United States.

But what makes this sale really notable is that Quercus is a venture capital fund with what one would have assumed to be a long-term outlook, and one of the few firms funded by a single figure. In this case it’s David Gelbaum, a storied investor who made his millions from mathematical modeling of stock returns at big funds. Quercus bought shares at $2.70, according to CTI, but only began selling at $0.61.

The move recalls a similar one by Bill Gates’ firm Cascades Investments less than two months ago in late November, which shed its own shares of Pacific Ethanol, a producer of plain-vanilla ethanol that is nevertheless now trading at $0.58, just two cents above the unfortunate BlueFire’s price.

Of course, plenty of other private and institutional investors have been closing out their ethanol bets for months, based on a one- to two-year outlook that has been heavily impacted by low oil prices. But having waited out the price drop to what could be a market bottom, these big-name investors, who can certainly withstand short-term market gyrations, are selling. It’s certainly worth a moment’s reflection.