Ethanol Wars: Xethanol Vs. Pacific & VeraSun (XNL, PEIX, VSE)

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After the market closed yesterday, Xethanol Corporation (AMEX:XNL) announced that a Federal Court had approved the settlement Xethanol had reached in a class action suit alleging that the company had misled investors. The settlement was reached in November 2007, and will cost the company $400,000. Xethanol’s insurer will pay $2.4 million plus up to $300,000 in legal costs.

But Xethanol has bigger problems. It’s stock is trading virtually atits 52-week low even with today’s gains, off about 85% from its high.Operating cash flow is negative and its gotten no traction amonginstitutional investors.

Still, Xethanol’s share performance is better than either PacificEthanol (NASDAQ:PEIX) or VeraSun (NYSE:VSE), which are both off about90% from 52-week highs. Ethanol companies can’t seem to thrive, evenwith a $0.51/gallon federal subsidy. It’s hard to see how the ethanolbusiness gets better going forward.

Xethanol shares are up almost 18% today.  Still, at $0.20, it is hard to get excited here.

Paul Ausick
October 9, 2008