Alto Ingredients Inc (ALTO)

[soupoftheday]

Could this be why insiders are loading up?

The potential buyout scenario suggests that if Valero or some other refiner wanted to, given the margins that exist in the industry and knowing what the investment per BOD of capacity is, you could expect a really attractive ROR.... In fact, to make this an equal investment to a greenfield oil refinery project, Valero or someone else would be willing to pay up to $6 per share, and still get the same rate of return....

So based on the current margins in this industry, the really interesting way to look at PEIX is as a potential takeover target..a buyer of PEIX could make on the order of 37% in the first year on such an investment. This is comparable to the ROR that Valero could see when it did its original ethanol deal at the end of 2009. Valero, or anybody else that wanted to get into ethanol, would be delighted to get this deal done.

Chances are the management knows this. They recently took on some debt with the idea of buying back some of their stock, and the debt itself will make the potential takeover less likely....

However, at the current margins for ethanol, and the current price of refining capacity in the oil industry, PEIX is a potential opportunity, of course much more so than it was when the plants were originally built.

http://usoilinventories.blogspot.com/2010/10/pacific-ethanol-potential-buyout-target.html