Pacific Ethanol, Inc. (Nasdaq: PEIX), has announced that it has entered into a definitive purchase agreement with a group of institutional investors to sell 5,496,583 shares of common stock at a price of $26.38 per share for gross proceeds of $145 million. The purchase price per share was determined based on a discount of approximately 10% to the average closing bid price of the Company’s common stock for the preceding five trading days. The investors will also acquire warrants under which they will have the right to purchase an additional 2,748,295 shares of common stock at $31.55 per share commencing six months after the closing and ending on the later of nine months from closing or 30 days after the effectiveness of a registration statement covering their resale. Cowen and Company acted as the exclusive placement agent for the offering.

 

The so called PIPE deal (Private Investment in Public Equity) has raised eyebrows in some quarters, following on so soon after a large tranche of shares, just over 2.7m, were released by the company in April. 

The net proceeds of approximately $138 million (not including any proceeds that may be received from the exercise of the warrants) are expected to provide the Company with sufficient cash to both accelerate its stated goal of completing five ethanol production facilities totaling 220 million gallons per year by the end of 2008 and to expand its plans to complete additional ethanol production facilities, increasing total nameplate capacity to 420 million gallons per year by the end of 2010. Additionally, a portion of the net proceeds will be earmarked for strategic investments in corn and cellulose process technologies.

The securities sold in this private placement have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from registration requirements. The Company has agreed to file a resale registration statement on Form S-3 within 30 days after the closing of the transaction for the purpose of registering the resale of the shares of common stock issued at the closing and the shares of common stock underlying the warrants.