I bought Verasun (symbol: VSE) shares almost two years ago, but I dumped the shares as soon as it became clear that Verasun’s management is dirty.
First, in May 2007, they issued $450,000,000 in Senior Notes without indicating why they needed the funds. At the time, I thought the issue was ridiculous because Verasun already had $287 million cash (see their 10-Q for the quarterly period ended March 31, 2007). However, I decided to wait and see how they would use the proceeds from the issue. I *hoped* that they would expand the distribution side of the company.
Then, in August 2007, Verasun acquired three ethanol refineries from ASA Holdings for $675 million. That’s approximately $225 million per refinery.
At that point, I dumped my shares because the deal smelled bad. The news media enthusiastically described the acquisition as “Verasun setting the bar in the ethanol industry for the purchase price of a refineryâ€. What a crock! When Verasun constructed a refinery, the cost was $125 million. Should I believe that Verasun needed to pay a $100 million premium per refinery that they acquire??? What a crock!
A short time after the acquisition, Verasun shut down one of the acquired refineries, claiming that “market conditions were not rightâ€.
They buy three refineries. They pay a $100 million premium for each refinery. Then, they shut down one refinery because it’s not needed. Is it possible that such stupid management exists on the face of the Earth? Nah, I say Verasun’s management is dirty.
The bankrupcy of Verasun is NOT the result of unfortunate circumstances. It was planned!
