What happened
Shares of Green Plains (GPRE -2.58%) are surging higher in morning trading Tuesday after hedge fund Ancora Partners sent a letter to the board of the ethanol producer urging the company to explore a sale of the business.
The stock was running 11.6% higher at 10:58 a.m. ET. The $34-per-share price it hit is still well below the $50 per share Ancora believes Green Plains can receive.
Image source: Getty Images.
So what
Ancora said Green Plains plan to transition from ethanol production to a sustainable biorefinery platform is actually a worthwhile strategy because there is significant long-term potential in the move. However, Ancora believes there is outsized risk as well, in terms of Green Plains' ability to pull off the transition, the political situation in Washington, and how well the change would be received by the market.
The hedge fund believes a better, safer bet would be to simply sell the company to an acquirer, whether in the energy field or in agriculture. Some of the biggest players in the space, including BP, Chevron, and Neste, a Finnish oil refining and marketing company, have already made acquisitions in the space.
Now what
Ancora foresees strategic acquirers willing to pay as much as $50 per share for Green Plains' business, a better than 60% premium over the ethanol producer's closing price yesterday.
But it would take more than Green Plains' board simply stating they are open to offers to get buyers to move off the dime. The company would need to become much more of an active participant in selling itself to the market.
Ancora owns nearly 7% of Green Plains' outstanding shares.
