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I don't think Gates' liquidating is ominous. He (Cascade Investments, formed to diversify his wealth away from 99% Microsoft) provided seed debt via convertible preferred. So, while Cascade selling shares has hurt the stock price, there is no effect on PEIX itself.

I'm thinking this could be a great buying opportunity. The analyst did not even mention PEIX in his downgrade. He only added that "many smaller producers may have to shut down."

Well, the fraud XNL shut down its 6 million gal/yr plant. (After overpaying to upgrade it to top notch condition). I'm sure other truly smaller producers are hurting. These shutdowns are only going to help the survivors by reducing supply.

But isn't PEIX's story still intact?

First, insiders were part of the group that just recapitalized PEIX. They have skin in the game. To my reading, the converts are not in the money until over $5/share.

Then, PEIX's plan has been different from the start.

1. They are located in the West. It is cheaper to transport the corn by rail than it is ethanol. PEIX has better margin as California needs a lot more etoh than is produced locally.

2. Their plants were selectively located near farms that can use the distiller gain by-product while it is still wet -- saving both transportation and drying cost virtually all competitors face.

3. Plants are located near the blending facilities, again reducing cost.

4. Plants are all brand new, so they are more efficient than some competitors

5. The Boardman Oregon plant just entered commercial operation -- just in time to supply the brand new etoh requirement in Oregon.

6. The Stockton CA plant is about to open. The unprofitable start up costs for both of these plants is now over.

7. PEIX co-founder and CEO ran the premiere West Coast etoh marketing company before it was merged with PEIX. They know the customers and keys to local efficiency.

8. It doesn't hurt that the Chairman is the former CA Secretary of State, has a degree in agriculture, and his ranch is itself a customer of the distiller grain/feed. Talk about quality control.

So, is PEIX being thrown out with the bathwater... or is there something more than the over-supply of shares going on? Long-term, it looks like PEIX is one of the survivors.

Please, if my logic is faulty, I'd rather hear it from fellow Fools rather than red arrows.
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