Here's what I think is going on. I have to caution you first though, there simply isn't enough good information to know for sure what's going on. I hate it when people express opinions without good supporting evidence, but in this case we're all working with just scraps of information.
A few things are obvious. They were previously talking about 3, maybe 4 plants. That number now is clearly down to just 2, though I don't discount the idea of a 3rd plant at some point in the future. Any way I look at that, it seems like management over promised and under delivered. That may help explain why they're paranoid about a shareholder lawsuit, and not putting out enough PRs.
Although they seem to have the permits for the two plants, it's obvious they don't have the money to build them. That's also disturbing, because they previously indicated that banks were fighting for their business. I don't believe for a minute that these guys are crooks, they've probably just got a normal case of "startup optimism fever".
A lot of new ethanol projects are on hold, due to fears of an oversupply situation a couple years down the road. These AENS guys however have no choice. They have to move forward because they have no other business segment to retreat to. I'm still a believer in the long term prospects for ethanol, but short term, the situation isn't clear. Keep in mind that ethanol competes with $3 gas (though commanding a slightly lower price than gas due to the lower heat content) yet it can probably be produced for under a buck a gallon.
I strongly believe these guys have been talking with investment bankers involved in the ethanol business. They know there isn't as much investment capital as there was a year ago when AENS first launched their business. Reality has set in. This isn't going to be as easy to do as they previously thought.
These guys have hinted at an acquisition, thus justifying their request for all those new shares. They also know how tough it is to get an ethanol plant up and running, and dream of producing ethanol ASAP. I bet those investment bankers are trying to sell them somebody else's ethanol plant, and need those new shares authorized to grease the skids for the deal. If that's true, then if you don't authorize the new shares, then they'll have to pass up the acquisition opportunity.
From my standpoint, I certainly wouldn't mind authorizing new shares if I thought there was a good possibility that I could get somebody else's ethanol plant in return. This company has been in business for a year, but they still haven't produced a drop of ethanol, much less pour any cement. It sure would be nice to see some ethanol flowing, and some revenue on the balance sheet.
On the positive side, with so many other ethanol projects on hold, there will be more resources and better construction deals available to those who continue to move forward. That makes sense, doesn't it? It's a simple case of supply and demand for construction services.
Do I trust these guys? I seriously doubt if they are crooks, but you can never be sure. To date they haven't done much to prove their abilities. All of their mid-course corrections make me uneasy. On the other hand market conditions have changed over the past year, and you can't fault them for that. I can however fault them for seriously underestimating what it takes to get an ethanol plant fully planned and permitted. To me that sounds like a simple lack of experience, which is especially disturbing since they have proudly touted their "seasoned management". I think the real problem is that they don't have good experience in all the required areas.
At the moment I'm inclined to vote for those new shares. I would love to see these guys get a good deal on a pre-existing ethanol plant, and that can't happen unless they have a lot of new shares authorized.
How do I know they won't abuse those new shares? I don't. I do take some comfort in the fact that the insiders own roughly one half of the outstanding shares. (I think that's still true, isn't it?) On the other hand they haven't been able to keep to their past schedules or commitments. That still has me very concerned.
It's still possible that these guys could be in a jam trying to finance those new plants, and need those new shares to bail themselves out, and cover up their past mistakes. They seem to be completely paranoid of a shareholder lawsuit, and there must be a reason for that. Maybe they're just trying to redeem themselves, and this really is a viable plan. I just don't know - too little information is available to know for sure.
The bottom line is that I'm going to reluctantly vote for those new shares. Without it, this company is likely to fall further behind schedule, and quite possibly miss a valuable acquisition opportunity. That however is the absolute limit of my generosity. If you guys screw up again, there is no more going back to the well. I don't think these guys are crooks, I just think they bit off a lot more than they could chew, and the landscape has changed. Maybe I should take some comfort in that, given that their recent experience has taught them some valuable new lessons from which to move forward.
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