Yet Another Value Podcast - Raper Capital's Jeremy Raper outlines strategic alternatives for Alto Ingredients $ALTO

Episode Date: July 3, 2023

Jeremy Raper, Founder of Raper Capital, is back on Yet Another Value Podcast to share his latest idea: Alto Ingredients, Inc. (NASDAQ: ALTO), a leading producer and distributor of specialty alcohols and essential ingredients. On June 29, 2023, Jeremy published "An Open Letter to the Board of Alto Ingredients, Inc." on his website (link below), where he outlines strategic alternatives for the company. For more information about Jeremy Raper and Raper Capital, please visit: https://rapercapital.com/ Jeremy's Letter to $ALTO management: https://rapercapital.com/2023/06/29/an-open-letter-to-the-board-of-alto-ingredients-inc/ Chapters: [0:00] Introduction + Episode sponsor: Stream by Alphasense [1:59] Alto Ingredients $ALTO background, overview and why Jeremy is interested [14:34] Carbon capture and sequestration [18:41] What Jeremy wants the company to do - outlines strategic alternatives [24:53] Valuation and why $ALTO should be an acquisition target [28:51] $ALTO political risk on subsidies [35:00] $ALTO management risk and alignment [42:41] Final thoughts on $ALTO [44:52] Update on $FAR.AX [49:07] The struggle investing in commodity-focused businesses: looking at coal and oil & gas sectors Today's episode is sponsored by: Stream by Alphasense Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are, and you can access primary research easily and efficiently through their platform. With Stream, you'll have the right insights at your fingertips to make the best investment decisions. They offer a vast library of over 26,000 expert transcripts, powered by AI search technology. Plus, they provide competitive rates on expert call services, and you can even have an experienced buy-side analyst conduct the calls for you. But that's not all. Stream also provides the ability to engage with experts 1-on-1 and get your calls transcribed free-of-charge—all for 40% less than you would pay for 20 calls in a traditional expert network model. So, if you're looking to optimize your research process and increase ROI on investment research spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. Thanks for listening, and we'll catch you next time. For more information: https://www.streamrg.com/

Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are, and you can access primary research easily and efficiently through their platform. With Stream, you'll have the right insights at your fingertips to make the best investment decisions. They offer a vast library of over 26,000 expert transcripts powered by AI search technology. Plus, they provide competitive rates on expert call services, and you can even have an experienced by-side analysts conduct the calls for you.

But that's not all. Stream also provides the ability to engage with experts one-on-one and get your calls transcribed free of charge, all for 40% less than you would pay for 20 calls and a traditional expert network model. So if you're looking to optimize your research process and increase ROI on investment research spend, Stream has the solution for you.

Head over to their website at streamrg.com to learn more. Thanks for listening, and we'll catch you next time. All right, hello, and welcome to the Another Value Podcast. I'm your host, Andrew Walker. If you like this podcast, would mean a lot if you could follow, rate, subscribe, review it wherever you're watching or listening to it. With me today, I'm happy to have Vaughn. One of the people, actually, I'm not even going to say one of the people's favorite guest, Jeremy, how's it going? It's going great, Andrew. Always a pleasure. How are you?

Jeremy, I was just surprised. I said Jeremy Raper's coming on. We were kind of keeping the name of the company under wraps until you released your open letter. Do you have any questions for Jeremy? And the questions, I mean, we're approaching Warren Buffett at Omaha level. It's just, Jeremy, what do I do with my life? Jeremy, how did your hair become so long? and flowing and beautiful. It was wild. But let's let me start with the disclaimer. Nothing on this podcast is financial advice. That's always true, but probably particularly true today. Jeremy and I are going to talk about a very small cap, a kind of levered company that Jeremy is going activist in. So obviously there's all sorts of increased risks there. And then I think we might

kind of flow through a couple of other names. So everybody should just remember there's plenty of risk here, not financial advice. Please do your own work. Anyway, Jeremy, the reason you came on today, we wanted to have you on today is because you took a position in a company and recently published a recently this morning published a letter to them uh the company is alto ingredients the ticker is a l-t-o and i just want to toss it over to you what's going on with alto why did you take a position what did you want to get done with the letter sure okay so just at a very high by the way thanks for having me back again it's always a pleasure at a very high level i'm going to try and dumb down some of the lingo because as we'll go through there's a lot of

kind of terminology with regard to regulatory credits, tax subsidies, what have you, are going to try to keep it as high level as possible so that people can understand. But I did write an open letter to the board of Alto. You can find it on my website, Rayprocapital.com, under the engagement section, or probably easiest is if you follow either Andrew, myself on Twitter, you'll probably find it in some of the comments. So you can read that letter by way of background. But essentially, Alto is a commodity ethanol producer. And they have two main. Two main. same campuses. One is kind of a high quality, fully invested, integrated mill called the Pekin Campus P-E-K-I-N, which is in Illinois. That has about 250 million gallons of total capacity,

of which about 60, 65%, call it 60, 140, 150 million of that 250 is what I would grade as specialty grade. So it's not actually commodity ethanol. It's kind of, they've invested to make it produce a higher value content, protein content product than vanilla fuel ethanol, which just gets sold as a blending agent into gasoline, right? And the rest of that facility is essentially fuel ethanol. And they have two further plants out west, one called Magic Valley, one called Columbia, which are smaller subscale dry mills, so not as high quality product that can't produce this specialty grade. So all in capacity is 350 mils, a million gallons, I should say. Two 50 million and very high value in Illinois, two smaller plants out west. Now, I don't mean to give too much

by way of background, but I think it's quite important. So the ethanol industry is a pretty horrendous industry, to be frank. The main problem is it's beset by overcapacity because a lot of the ethanol production facilities are owned by pharma cooperatives. And essentially to make ethanol, you ferment corn. And so if you're owned by pharma cooperative, they're much more interested in, you know, selling the corn into the ethanol-producing facility into the ethanol fermentation process and they are about actually making money on ethanol. So historically have this big problem of overcapacity in the industry that was solved by an export valve.

That export valve was predominantly China. But then when Trump came in, in 2018, I think it was, he slapped a bunch of tariffs on all kinds of products from China. And China responded by slapping huge tariffs on U.S. ethanol. So it almost closed the Chinese market to U.S. ethanol. A lot of that ethanol actually goes to other places. like Canada now, and it created this big imbalance in the market in the US. So it's kind of in a structural overcapacity, but because a lot of these ethanol facilities are owned by farmers,

they didn't drop out of production when prices collapsed. They kind of stayed as lost leaders because they're there to essentially buy corn. So it's kind of a prototypical commodity industry in a state of, I don't want to say semi-permanent, but chronic overcapacity. And as a result, it's kind of beset by your typical commodity, vicious cyclicality, price swings, what have you. Now, initially coming out of COVID, so that's kind of overall background. Initially coming out of COVID, ethanol, a lot of ethanol dames actually did quite well. For a period one, driving demand, you may recall the summer of 2020, driving demand was insane because everyone stayed at home.

So actually, you know, driving demand, which is essentially the main driver for ethanol demand because of the blending, surprised at the upside and stocks have been run down because a lot of facilities were closed during COVID, so actually saw a big pickup in pricing. Combined with that, a lot of these facilities lucked into a huge windfall from alcohol sanitiser. So one of the value-added ingredients that a lot of these guys make is actually input into hand sanitizer.

So the price of this stuff went up, you know, 10x or whatever. So just going back to Alto for a second, you know, they made 60, 70 million of EBITDA in 2020, 2021. So these were kind of banner years, like 5, 6, 7 average year. EBITDA is more like 30, 35 million. So when they're making 70 million EBITDA, that's kind of like a really, really good year. But it was really kind of driven by these two factors,

there's temporary imbalance in the market because of COVID shutdowns, what have you, then surprising demand and driving related demand, combined with this insane profitability of sanitiser the last, it for, you know, 12, 15 months and then completely died. Now, in 2022, it was the complete opposite. By 2022, the market's kind of collapsed for a few reasons.

Obviously, a lot of that idle capacity had come back. more importantly, there was a lot of idiosyncratic issues with regards to feedstock. So, you know, Andrew, you're involved in all these things you followed what happened last year with very closely with supply chains, bottlenecks. But essentially what happened was you had kind of light, you literally had lightning strikes in some of the rail systems in Illinois, which really affected Alto in particular. They're the largest user of the Union Pacific railroads. So that really hurt them. But you had other things like you had a massive explosion in natural gas prices. Natural gas is one of the main input costs for production of ethanol.

So not only do you have, obviously, Nat Gas went to $9 Henry Hub, you also had a big explosion in local basis costs for Nat Gas. So Illinois-based Nat Gas actually blew out even more so than, you know, your generic Henry Hub pricing, which is very expensive. So you had a big explosion import costs. You had a huge increase in rail costs, freight costs. You had beyond just the pure cost, you had bottleneck supply chain issues. You couldn't actually get corn where you needed to get it at certain times. You know, labor issues, strikes, what have you. And then you also had an explosion in corn basis, meaning the difference between the futures price of corn and the actual delivered physical cost of corn.

Now, this is important because to make ethanol, you have to ferment corn. You can't just buy it on a screen. You actually have to get it from a granary. And so some listeners may be familiar with aluminium. There's what's called a Midwest premium. It's a similar concept. You trade it on the screen, but when you get delivery of the product, you have to pay a premium for physical product. that premium moves around just like a market.

There's a market on that premium, and it's called Basis in ethanol. And that blew out last year as well for some of the reasons we discussed supply chain issues, some local idiosyncratic issues, also things like the Ukraine War, which really tightened the global wheat market, and obviously that's related to corn as a food input. And so there was a huge demand for corn to go to other places other than the Midwest, and so the basis absolutely exploded. So you kind of had too much ethanol in the system,

combined with higher input costs, combined with a few other idiosyncratic issues, plus massive increase in kind of OPEX, you know, net gas, what have you. And so profitability just collapsed. And so last year, they, I mean, from it, I don't have the numbers in front of me, but in fourth quarter,

they lost money at the negative EBITDA level. First quarter this year, substantial negative EBITDA. It's a low single digit EBITDA on the full year, basically. I had the 8K pulled up, so I'll just, they did negative four and a half million of EBITDA and Q1, 23. So, you know, they were negative. And the DNA for, you've got these big refineries,

like the DNA for these, sorry, ethanol product. The DNA is real here. So if you're slightly negative on adjustity, but on a like cash, all in basis, it's, it's quite negative once you account for that maintenance cap ads. Definitely, definitely. So again, there's a very high level by way of background. It's important. So while this was all going on, Alto stock, you know, for most of 2022, it was kind of like a five to call it $6 stock. Maybe it was a, there slightly early in the year, but by the end of the year, it was kind of like a $3, $3.00. And then they reported the four Q numbers in early 2023, and the stock just got absolutely obliterated. I mean, it went from, you know, $3.352, the low was like $1.30 or something.

And the reason for that, I mean, obviously the fundamentals have deteriorated massively, but more than that, the balance sheet, which had been actually quite clean until a couple of quarters ago, had deteriorated pretty rapidly. So they managed to go from a chronic net debt position to actually a decent net cash position over the last 18 months as they sold a lot of non-core assets and managed to generate some cash through the kind of good years 2020-1, as I mentioned, but mostly through asset sales. But then at the end of 2022, they made the curious decision to draw down a lot of debt, very expensive debt actually, you know, 11% all in cost of debt firstly in, you know, super senior paper, claim on all the assets kind of debt with an

equity kicker as well and an original issue discount one and a half percent. Because kind of the way to get away from this commodity ethanol purgatorial cycle is to kind of move into high value added products. So I mentioned before that some of their, some of their capacity has already kind of been semi-upgraded and produced value-ated products. Essentially what they're trying to do is get out of the commodity business of making fuel ethanol and then making high-valuated products, they essentially extract more protein from the ethanol molecule and sell it as kind of like animal feed feedstock or an ingredient into distillers grains. So making out making alcohol beverage ingredient or you know hand sanitizers one example but those kind of other consumer facing

products inputs which obviously trade at a much much higher premium than your kind of $2.30, $2.50 a gallon which is kind of ethanol trades. So in order to do that they have all these different investments they're doing. And by the way, I'm talking, you know, they're doing, you can pull up their four. Actually, they do have a good slide deck from their four queue report where they go through a lot of their investments. And it's, it's really a laundry list of different things from new calls. On their earnings calls, they talk about them. And it's like six paragraphs long, all the descriptions. And whenever you see it, you're like, what is this a 500 billion dollar company that's like talking about all. It's crazy how small they are and they've got all these

different investments. There's something. I mean, it's really all over the place. There's at least seven or eight different things. And it's not that there are seven or eight different things tied into one facility or one product. They're really disparate project. So at one facility, they'll be building a new corn storage facility. Then they'll be trying to increase the, they'll be trying to increase their corn oil yield. Corn oil is a byproduct of ethanol. It's an input into renewable diesel. It's actually a high value product. So they'll be trying to do that, which is a good thing. Another one, they'll be trying to increase their primary yeast production, essentially towards the drinking alcohol industry, or what have you. Then they're going to do a cogent plant, you know, to try to become more

efficient at the core Pekin campus. Now, then they have the carbon opportunity that we'll spend a lot of time on. I mean, literally a laundry list of different things. Half of them are to do with the core Peking campus, which as I mentioned is kind of the crown jewel of the company. But a lot of them were still to do with these structurally challenged Western assets, which, you know, I have a bit more of a problem with. Anyway, so they drew down this extremely expensive cost of debt to theoretically fund a bunch of these projects, but not actually the projects that I think have the most value. And I think the market has the most value. And these are the decarbonization related projects. So essentially what you have is a company trying to undergo a pretty

fundamental corporate transformation from a commodity ethanol producer to a value added protein and derivatives producer with a lot of carbon-related opportunities that have relatively recently come to the fore after the passage of the Inflation Reduction Act. So the Inflation Reduction Act is a piece of legislation passed in the summer of 2022 by the Biden administration that I go into some detail

in the note at a high level. I mean, it's very technical, obviously. It's kind of like a 2,000 page document. But essentially what that legislation did was completely changed the value in use of invested ethanol plants. Because, you know,

you're taking this thing that produces a commodity-grade fuel input, essentially, but ethanol could be considered separately as a pure carbon dioxide factory, because as a byproduct of the biogenic fermentation process, it's one of the few industrial processes that spits out almost pure carbon dioxide. In other words, so again, backing up a little, if we were to talk about carbon capture, which we'll discuss in a moment, the number one benefit to, I guess, that the easiest way to capture carbon is if it's a very, very high purity off stream in the off gases of the bio refinery, because the higher the purity, the easier is capture essentially. So conceptually, if you think about it, I guess I didn't really go through. I think a simple way, Green Plains, GPRE, which is a much larger, much more successful competitor with lots more specialties.

But they held an investor day, which I know you read and an IRA teaching, which I know you read and really liked. And one of the things they said, like, look, the corn molecule, if you think about it, when you turn it into anything ethanol, like it's just releasing pure carbon dioxide, right? Like a little tiny corn kernel is basically a storage of CO2 is how you can think about it. And when we do anything with it, all of that CO2 escapes. So if we can capture all of that CO2, as you're saying, it's pure, you're capturing it, it's pure. It's the perfect thing for carbon capture if you can capture it. Exactly. And so just to recap carbon capture and sequestration, CCS, this is a, I don't want to say it's a novel concept. It's been done in various forms for well over a decade by certain industrial players. But under the IRA, it is being massively incentivized through these crazy generous subsidies. So the whole reason these ethanol plants now have massive value to, well, to financial bias, strategic buys, what have you, is that this 99% pure carbon dioxide stream, if that can be captured, stored, and. and sequestered,

sequestered, meaning injected into a geologic formation underground such that it can be contained for, you know, a thousand years without permeating into the surrounding rock or sediment. If that can be accomplished, the US government is going to pay you a crazy amount of money. And there's two different kind of subsidies that they're offering under the, well, they existed before the IRA, but they got beefed up on the IRA. One of them is called 45Q and one of them is called 45Z.

I'll save the technical description of the actual terms. People can read my note and look at the math if they really want to know, but I keep a very high level. Just on the Pekin campus alone, Pekin campus produces over 700,000 metric tons of almost pure carbon dioxide a year. Just on the Pekin campus alone, forgetting the Western assets, I think the carbon capture opportunity alone is worth over $140 million, fully invest, and you have to invest and build the machinery to capture the carbon.

you have to pay to store the carbon, you have to pay someone to transport the carbon to a site, of course, but 140 million of EBITDA, putting that in context, as I said, two, three years ago, a very good year, Hippata was 70 million. I mean, this is totally unutterly transformational, and again, this is kind of two levels deep of this carbon opportunity. I won't go into too much detail, but as you decarbonize your operations, it opens up other levels of subsidies and other new products, such as sustainable aviation fuel, that get all kinds of different subsidies, not just from the federal government, but actually from

state governments as well. That could be of extreme that. But I'm not building anything in for that. I'm literally building in the value of 45Z credit, which is kind of like the vanilla number one credit everyone's going for. And then LFCS, LCFS, low carbon fuel standard, which is an established carbon market in California, Oregon, I think Canada as well. I need to double check. where basically if you've decarbonized through capturing the carbon, then your ethanol becomes clean ethanol and green ethanol, whatever they call it, you sell it into California, and you get an extra $80, $90 per tonne just for that. And now, a quick word from our sponsor.

Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are. And you can access primary research easily and efficiently through their platform. With Stream, you'll have the right insights at your fingertips to make the best investment decisions. They offer a vast library of over 26,000 expert transcripts powered by AI search technology. Plus, they provide competitive rates on expert call services,

and you can even have an experienced by-side analysts conduct the calls for you. But that's not all. Stream also provides the ability to engage with experts one-on-one and get your calls transcribed free of charge, all for 40% less than you would pay for 20 calls in a traditional expert network model. So, if you're looking to optimize your research process

and increase ROI on investment research spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. Thanks for listening, and we'll catch you next time. I think there's more we could talk about with the specifics of each individual subsidy everything, but I guess let's jump, you know, we're 20 minutes in, so let's jump to the heart of the matter, right? There are all these ethanol in general, like it reminds you of a few companies that followed where you've got these assets and all of a sudden you lock into something that's super,

useful, right? Like at the heart of COVID, if you, as you said, at the heart of COVID, if you could make hand sanitizer, all of a sudden you had the greatest boom of all time because the demand was literally unlimited and supply was fixed for a while. You know, for last year when all the Russian oil gets banned, if you could ship oil, if you were an oil tanker, all of a sudden demand goes through the roof and you get lifetime profits. It's insane. So they've locked into basically the IRA is just perfect for everything. They've lucked into this thing. They've got a lot of things that they can produce, but I guess where I wanted to jump to is, what are you calling on them to do, right? Like, what are you here? You've bought up a serious stake in the business. You send a

letter to the board. What do you want them to do? Okay, I want them to sell the company, but more specifically, I want them to divest the Western assets, so the suboptimal, smaller capacity kind of non-scale assets. I wanted them to divest those and then run a full auction for the peak in campus. My thesis is, obviously, this generic thesis around ethanol assets, well-invested ethanol acid being highly valuable. That's the general thesis. The specific thesis about Pekin is that this is a strategic asset now because of its location. So the key about carbon capture, anyone can, okay, I don't want to go too high level. Anyone can theoretically build the infrastructure to capture the carbon. The real value in use is transportation and storing. Carbon dioxide has to be

transported as a liquid. About 10 times the pressure of natural gas. You cannot actually use a natural gas pipeline to transport carbon dioxide. You need a special pipeline. So the actual bottleneck to a lot of carbon economics is the distance you have to pipe it from the source to the storage side. Yep. Pekin has two hugely valuable options. One, they could theoretically do what's called direct inject, meaning they basically just dig where they are undergritting it. And if the, if the geologic quality, you know, 500 meters below the earth is of irrelevant and the right quality, then you could theoretically store your carbon there because Pekin sits on the middle of the Illinois basin where it has these kind of geological structures necessary to store

gases deep underground. But even if they can't do it directly at the site, guess what? They're only 70 miles away from one of the world's largest operating carbon capture storage facilities operated by Archer Daniels Midland in a city called Decatur, Illinois. It's near Peoria, if anyone is from the Midwest. So instead of being, you know, based in the middle of nowhere in North Dakota, or a lot of these, you know, they're in the corn belt, right? So a lot of these ethanol facilities are in the middle of, you know, Wyoming or Nebraska or whatever. You know, there's, there are 70 miles away from a perfect, picture, perfect site. They could easily get, they don't even have to build a pipeline themselves.

Pay ADM a fee and store their carbon right there. So it's situationally unique. It's a well-invested asset, meaning it has a wet mill. They've already made a lot of the investments necessary to actually add value to the finished product. But it's a perfect, perfect site for carbon capture. I mean, it's of scale as well, right? It's not like a tiny facility. $250 million is a solid level of production capacity.

And actually, having spoken to some industry experts, there's upside. There's brown for capacity expansion. So there's upside to an acquire to increase production capacity, another 30, 40, 50 million gallons, obviously to capture the carbon on top of that if or when they develop that. So it's locationally advantaged. It would have a huge value in use to an acquirer. And my thesis is, look, Alto is currently capitalized is just not in a position to make the necessary investments.

Okay, they do not have the balance sheet required. That was demonstrated late last year when they went and got this kind of usurious loan, point one. Point two, when the equity is absolutely collapsed and cost of equity exploded, the market is just not there for them. The capital markets are just closed. They don't have the wherewithal. more importantly they perhaps more importantly they don't have the track record of successful execution

like people people talk about green planes okay green plays is excellent company i'm not as near current on it as i should be probably it may be a very interesting investment in the coming years um they're miles ahead of alto in terms of where they are both on the protein side and on the carbon side and even they are being called upon by activists to do something with the business because you know they're a three billion dollar company what have you with a billion gallons of capacity. And even then, some of their shareholders think that doing it in the public markets is going to be too tough, take too long, and potentially be too risky.

So, you know, Alto, you can pull up the long-term shareholder return chart. It's kind of 10-year shareholder return is like negative 60%. It's kind of being perpetually undercapitalized and poorly managed, has a horrendous record of capital allocation. They do not have the credibility. They don't have the capital. Frankly, they don't have the, I'm sorry to say that they just don't have the, the what I would call the executional know-how to proceed with a corporate transformation like

this. And because of that, because of that strong industrial logic to selling the core asset, that combined with the financial upside to the owners of this business, meaning the shareholders, makes it a no-brainer. Because here's the, here's the rub. Today, stock is $2.80. That's about 50 cents a gallon in terms of the valuation of the assets, invested capacity. Green Plains got on their 4Q call and said, look, people are bidding $1.50 a gallon for invested assets, assets of scale, meaning $100 million gallons or greater of capacity. People are bidding a dollar 50 a gallon and aren't even getting invited to the second round. Replacement value on assets, not wet mills necessarily, but even dry mills, probably about $2 a gallon. For something like Green Plains, it's much higher because they've been spending a lot of money to kind of add value to the assets over many years.

But for a vanilla kind of ethanol asset, it's probably about $2 a gallon. gallon. This thing's trading at 50 cents a gallon, all right? You just total up the working capital and give 40 cents a gallon for the crappy Western assets. You get $6.50 a share. Stocks are 270, 280. I mean, if I can just add there, I'll include a link to Jeremy's letter, but you know, even more, Jeremy's letter values, you can go look, appendix A just values the peak in campus at $1.70 per gallon, cut it down to $1.50 if you really want, but a $170 per gallon, that's $420. That comes out to $425 million in value. The whole company right now is valued at an enterprise value of just slightly over 300 million.

So you're talking about the peaking campus covers all of the value plus some, and then you would get another, I don't know, 40, 50 million from the other things. Plus, if you want to give them credit for some of the working capital, working capital is very large. Peaking campus covers everything. Yeah, so just to be clear, they have 120 million of networking capital. I give them credit for my year two thirds of that. So then the reason I do that is because in private. transactions they have sold a fair few assets in the past and other guys like green plains of

divested assets when they trade these assets they do tend to get recredited for the working capital that goes with the business so i'm not treating it fully as cash but there is some cash like value there so but yeah basically yeah gone oh i was just and that would go to the working capital like a lot of these things like some you get just because you get it back and like there's a big working capital investment in the and having the inventory and everything and you can deal with that one way or the other but another thought is like a big strategic player who comes in, you know, if they do it and they're selling hundreds of thousands, hundreds of millions of barrels of things, they generally are going to get better terms

and everything. So they're dealing with the same thing. They can probably optimize and trade around. I guess the point I was trying to drive to in eloquently is if they sold to a green planes or somebody larger, like the plant, obviously you need the people working on the ground, but there's actually going to be real operational synergies where you sell up to the person where, hey, you only need one account manager. Guess what?

We're going after a lot of subsidies. You do need lobbyists. You do need regulatory people to, like, check all the boxes. Well, they're already doing 10 plants. You can toss this one plan on there. As I'm saying, you're going to get better working capital terms. You tend to be able to get a little bit of, hey, we were fulfilling this contract from a plant 100 miles away. Alto's plant's a little closer, so we'll do it there.

And we get a little bit of synergies there. Like, there just tend to be a lot of those little things when you go from being basically a one plant company to selling to a strategic. There should be that kind of ties into something. I probably should have spent more time on the litter. I didn't. There should be tons of potential acquires. for this asset, not just financial buyers for sure. Like, as I said, if this thing's going to be doing $140 million of EBITDA kind of level one, level two, EBITDA before you consider these

add-on options and you're paying what three times EBITDA for it, look, all the renewable businesses we focus on, these all trade near double-digit multiples or high double-digit multiples. Yes, this needs to be proven out. Yes, this is an EBITDA next year. It's probably two, two and a half years out, but, you know, nothing sexier than carbon capture. It's a very sexy story. Three times but da for, as I said, kind of low-hanging fruit numbers, this should be very, very attractive. That's the financial bias. Then there's a whole suite of strategic place who would love to invest, I believe, in something like this from everyone from agricultural conglomerates who want to develop their carbon businesses. Decarbonization, it's a very, very hot topic.

So I mentioned Archer Daniels Midland. Obviously, they're a huge player, but you could go to any of the large agricultural conglomerates, cargo, what have you. They're all expanding in decarbonization. As green plains, this would be a very nice little bolt on for them. To be honest, their plate might be a bit full, so I'm not saying they're the most likely acquirer. You could even go look at upstream or integrated oil names who are looking to decarbonize or kind of build out their renewable businesses as well. Obviously Chevron bought Reggie, which is primarily an ethanol player and they're moving into renewable diesel. But again, you know, this is a very analogous kind of trade. So you could look at oil majors as well.

I mean, there's literally there should be, and the final point I would make is this is this is not a big purchase, right? We're talking even at the numbers I'm talking about a few hundred million dollars, once you divest, once you divest of the crappier assets, you know, you get 50, 60 million back from that. So we're talking close to 350, 400 million. It's not a big ticket transaction for, I think, is a pretty interesting asset. So there should be a lot of interest. Let me ask, I think there's a lot of questions around here, right?

Like, is the company going to do? But I think the main question I have when I look at this, a lot of people who are going to have when they look at it. They're going to say, okay, Jeremy, this sounds great. Obviously, there's a big trend coming. You can go read. Again, go read the GPR. IRA teaching day from six weeks ago or whatever.

It's really informative. But when I've talked to really smart investors on ideas or ideas like this, they say, look, I understand. You're making a great pitch. But here's the issue. None of this is economic in the sense that, especially ethanol, the whole ethanol and the subsidies and everything, it is just the stupidest thing.

One of the stupidest things the government does, right? Like, hey, let's take all of our food stock and let's throw it into our fuel supply for green reasons. except when we throw it in our fuel supplies, we're really seeing tons of carbon dioxide. And, you know, it's increased in our food. It makes absolutely no sense. And a lot of renewable diesel, whatever, a lot of them do that. And a lot of the people I look at, I talk to you just say, hey, I just can't invest in something

that doesn't make sense, even if the big things are there. Because when you rely on government subsidies, like, look, the ethanol industry is very powerful. The corn industry is very powerful. Ethanol has been here for, like, 20 or 30 years. And everybody's saying it's stupid the whole time. And it hasn't gone anywhere. It gets really locked in. But when you rely on stupid subsidies, like sometimes they just get yanked away, like, out

of nowhere. And people just can't, a lot of people just don't want to underwrite that political so I threw a lot out to you, but that is like the overwhelming question I have when I look at things and things like this. And I think a lot of investors will have. Look, it's a good question. I mean, I can't really push back too hard on it. There's definitely pen stroke risk here.

I mean, what I would say is probably this, you know, that all. saying approach the world as it is, not as you wish it to be. So you and I both know these subsidies probably have all kinds of negative concomitants and are not economically rational and not the best use of our food, agricultural industry, whatever, long term. And yet do you see the winds blowing any different way? I mean, look at sustainable aviation fuel. Okay, let's look just for an example.

Everyone knows jet fuel is one of the last kind of fuel markets to be decarbonized. The kinds of subsidies the IRA is incentivized for SAF are just absolutely insane. So depending on the carbon intensity, meaning the amount of carbon dioxide that gets created or I guess dispersed into the atmosphere per unit of production, depending on the carbon intensity of the SAF production, the subsidy will be between $1.25 and $1.75 a gallon. So as high as $1.75 a gallon at the federal level. Then you have a bunch of US states also talking about giving secondary subsidies that are out to be double-dipped, by the way, for the exact same production, again, over a dollar a gallon.

Like, for clarity, this ethanol right now, commodity ethanol trades at $2.30, $2.40 a gallon right now, if you can turn it into SAF, you're going to get what, 100, 150% margins, and the pathway from turning fuel ethanol, fuel alcohol to sustainable aviation fuel, yeah, you've got to crack a few molecules. There's a chemical pathway to do it. You've got to spend a bit of money, but it's just insane. And so do I think that subsidy is going to exist forever? No, but then I look at what other countries are doing. And look, the EU is mandating you have to have a certain amount of sustainable aviation fuel within your blend as an airline by 2030.

Japan just instituted some massive new mandates for having a certain percentage of sustainable aviation fuel. There is a massive shortage of this stuff. So what I would say is despite our best intentions and kind of, you know, we're both investors with both kind of economically rational, we like to think that way. These subsidies, they have a tendency to keep getting extended, right? They have a tendency to, you know, as long as the political will is there within the electorate, you know, you can kick the can for quite a long time. Frankly, because this, what I would say is this, to answer your question specifically,

I'm much more bullish on the long-term SAF potential than AMON, say, the 45Z portion of the credits for carbon capture and sequestration specifically, right? However, because CCS, decarbonization of the ethanol molecule, let's say, because that's a gateway to all these other SAF-related subsidies, you're actually in a situation where even if the subsidy only, that is the carbon sequestration subsidies only last to say four years, and at the moment some of these are scheduled to actually expire in 2027, so they do have to get their act together. Even after that, if you're no longer getting the carbon sequestration subsidy, you're getting $253 a gallon. total for your SAF and you're making SAF from 2728. You're laughing. You're absolutely laughing. So I'm actually much more comfortable underwriting kind of this long tail to SAF kind of institutionalized demand that given how crazy our political leaders are. But no, I mean, it's definitely one of the key risks. One of the key risks. I would say if I was looking at this kind of sector in general, GPRE or ALTA or whatever, I would, a Republican sweep next year is probably

one of the bigger risks because we all saw what McCarthy tried to do with the debt ceiling. And obviously, you know, if the Republicans sweep, then they probably much less supportive of these kind of policies. But you say that, but a Republican sweep also, like a lot of the Republican senators are from the Midwest states that, you know, like Chuck Grassley from, I can't even know, what's the state? Is it Indiana? Is that where he's from?

Iowa, Iowa. So he's like the leading proponent of RINs and all these types of subsidies because he's got tons of corn in his state. So Republicans, I mean, yeah, our vision of Republicans is probably like slash spending slash taxes get away. But these things are really deeply ingrained in the Republic. Like a lot of these subsidies are actually, it's a little bit bipartisan, right? Bipartisan because a lot of the Republicans just want to subsidize their corn production. And a lot of the Democrats want to subsidize anything that is green or quote unquote green. it is a risk, but it's interesting.

Let me turn to the other big risk here, right? And that would probably be management. And I've got in my notes, I'm looking over here. You mentioned earlier, but one of my notes from reading their calls, I just have a quote that says, these guys are trying to do way too much at once, right? Just way too many capital projects. I think management, and you published the letter this morning,

we haven't heard that from them. There is a semi-shareholder-friendly member on the board. There's been insider buying. We can talk about all that. But I think management might look at this and say, hey, why are we going to sell now when the pot of gold is here? And with two years of capital development, we can kind of realize that pot of gold, right? Why are we going to sell for $5 per share today when two years from now with a little

Kappex, we could be talking about hundreds of millions of EBITOM. We could be talking about selling for $2 billion or $20 or 25 or whatever the number is. And I just want to pause there and add on. You've got appendix two or three at the back end of your thing. The CEO here, he's been in charge for about 10 years. I don't know if shareholder value has been a particular focus, given the share price, but he has got, he's gotten paid a lot, right? And he doesn't own a crazy amount of stock versus how much it gets paid.

So I could also say, hey, not only is there the, why sell before the pot of gold is really here, but the insider incentives might be, hey, let's just keep bent on the come because we're, you know, this is a problem with a lot of companies. We're getting paid a lot. So why sell today when we can just keep making money? I mean, it's an excellent question. It's always the rub, right? I would say, look, you sell because your shareholders get to a point where they're fed up

and force you to sell. That's point one. I mean, if you look at the register, let's look at the register. The largest disclosed, well, I'm at 1%, okay, so it's not a huge position, but the largest that I can see, I don't have Bloomberg. I only have ticket. I'm looking at my Bloomberg right now, so I'll fact check you on the spot. The largest disclosed active shareholder, so not a passive index.

piece or whatever that I saw was like 2% of the company, 2.5% of the company, something like that. Look, I've heard rumblings, there may be other large active shareholders who have not disclosed because they're not above the 100 million AUM threshold that they have to disclose their position, and they might have a few percent of the company. But either way, this register is completely and utterly fragmented and open. That's point one. Point two is, if you look at the traded volume, this register has turned over twice this year alone. As I said, this stock peaked at about six bucks, six, six-fifty last year. My thesis is you can get at least six-fifty in a sale. You mean to tell me the register that has turned over two times in the last six months,

probably three times in the last nine months, that there isn't support for, what, a third, more, half the register where their cost basis is three bucks to get a hundred percent premium and a certainty of value, as opposed to keep listening to the Pied Piper running the company and take his word for it that he can actually make the investments and get them done in time and on budget and not actually have to kind of have a disaster before ethanol rolls over again and kind of put the whole thing at risk because this is still a little bit levered. Look, ultimately, I'm not always on my high horse with like, oh, the shareholders always get what they deserve. Certainly not like that, but there isn't a major shareholder here who's like there isn't a family, this isn't a family

controlled business. This isn't a controlled company. This is as frankly as open as it gets. the register has turned over multiple times in recent months. And it's eminently feasible that they could clear 100, 150% premium from their cost. Like who's not going to, you know, certainty of value. I'm not talking about a 10% premium here. I mean, this is serious premium. So I would think that shareholders will vote with their dollars first. And then in terms of the secondary, I guess the other point you made,

you know, why would they sell out when they can theoretically turn this into a massive cash cow? I mean, it goes back to our discussion on the politics. Yes, it appears to be a veritable bonanza right now, but there is always going to be penstroke risk with these things. There is necessarily going to be this kind of, well, what's happening next election cycle or, you know, next time the debt ceiling needs to be renegotiated, whatever, right? So, yeah, they do have a window, certainly, the next few years. I mean, IRA is highly unlikely to be touched during its initial kind of implementation now. until 2027. These guys didn't even publicly comment on the 45C tax credits in any of their documentation. Forty-five Z is the heart and soul of the IRA in terms of value regarding decarbonization.

They only talked about 45Q. Forty-five Q is wildly insufficient. If you go back and look at the GPRE teach-in, they go through the math on 45-Z. Now, this is the key provision, and that you need to have your investments locked and loaded by 2027. And there is a big advantage to actually moving first because as the guys at GPRE discussed, if you move first, then you get on the pathway to these other kind of opening up SAF and what have you ahead of everyone else. And that essentially means if 45Z does actually go away at the end of 2027, it doesn't get extended, you're still good to go. So the very fact that they've kind of been dragging their heels, or I don't even know if they've been dragging their heels being pulled in too many different directions and cannot focus on this opportunity properly, which, I mean, is completely an highly transformational far more than any of the other projects they're working on. It doesn't lend them a lot of credibility in my view. You and I have a, I'll just call it a refiner investment in common.

I don't want to mention it here because we don't need to dive down that rabbit hole. But one thing that strikes me is when they saw a similar, a similar path to SAF, right, a similar path to renewable diesel, like lots of government support, all this sort of stuff. It's not like they shut the rest, everything in the rest of the business down and didn't do anything and burn it to the ground. But they basically said everything else is, you know, as steady state as is, We're going to make sure we run it. We're going to make it. But the whole company is singularly focused on this one opportunity because it is so large.

And I am kind of struck, as you're basically saying here, like, also 45Z, I knew about it because I know of oil companies that have pipelines. And they're like, hey, you know, we're doing, we're getting oil out of the Permian or whatever. And because we're drilled down, like we've got access to geological formations that would be so great for 45Z. I'm simplifying a little bit or going up. But they were like, this is the best thing ever. We need to immediately start aggressively attacking it. And here you have a company that is so perfectly situated for it. And instead of like aggressively, immediately, as soon as this comes out, going all out at it,

they're kind of saying, oh, we'll go after that. But you know, we'll also try to increase our corn yield from 1% to 1.1%. And not that the other things are great, but it's a shareholders. All they should be talking about and focus on is this, because as you're saying, the opportunity is so, so large. Let's see. Just one other thing I wanted to rant about, I completely agree with you. Like, this is a $200 million company.

and I look at the board and the board in total owns 4% of the common. I mean, if this was a $4 billion company, 4% might be okay. But like whenever you've got a company under $500 million, and I ask companies invest in all the time, like if you're under $500 million, you need to have a serious shareholder on the board. Like, come on, there's got to be a guy who owns 3%, 4%, 5%, whose one focus is, hey, I get paid when the price goes off and shareholders make money because the rest of these guys, if you own one percent of a company, you know, the CEO, he owns 900,000 shares. Cool. That's 1.8

million. I think if I remember correctly, he makes two million per year. I'm kind of trying to flip through here. But it's like he's 75. He gets more money from salary and bonuses than he does here. He's not, he's not fully aligned with shareholders. So just to jump my hires there, we've covered a lot on alto. Again, we got a lot of other questions on other stuff we can quickly bounce through. But I think we've mainly covered everything. Again, your letter will be in the show notes. anything else people should be thinking about with Alto here, though? No, I mean, I think that covers it. Look, there's kind of a transformational story. These kind of historically bad commodity assets have been given a new lease of life largely

through this decarbonization opportunity. A lot of what you mentioned is correct in terms of management risk and a bit of pen stroke risk. Those are the kind of the two risks to kind of do diligence or think hard about if you are looking at this. But the value to acquire is very, very clear, very straightforward. And I should highlight, I did mention it in the letter, but given the amount of the register that has turned over, obviously I've spoken with a number of these investors. And I would imagine that presenting a market test where a competitive process results in something like six or above $6 a share in value presented to shareholders, I imagine that would be met extremely sympathetically by a plurality of the register. I'll just leave it at

that. But yeah, it's a very, it's a relatively straightforward case in terms of the setup and the valuation and the kind of the numbers argument, but the lingo around the industry and kind of the ethanol industry and now the decarbonization story is a little bit. There's a little bit of a technical linger on that. So people would have fun diving into that, but the actual setup part of it's pretty straightforward. You know, and just one more thing, even if this company would say, hey, we think there's a huge pot of gold at the end of this. rainbow. We think shares can be worth $20 per share three years from now. You've got to at least go out when you've got an asset that is this strategic and has been this undermanaged for so long,

you've got to at least go out and do a market check and let your shareholders decide, hey, we went out. The best bid we got was $6 per share. Here's our capital markets day where we present our path to realizing $20 per share of value. And here's why we think we should do it. You've got to do one of those two things, but you've at least got to present a clear picture of both sides. I guess we could probably figure out the six dollars. They've got to present a clear picture of where they think they can go so people can evaluate because the standalone just really doesn't work. Let's go to other things.

One other Jeremy Raper special situation, Barr, which I think is in a much better place today than it was even three weeks ago. But do you want to talk about what's been going on with Barr? Because I think I got about four people asking. Sure. I mean, look, I would love to try to remember when we last spoke about it. I assume it was, I think we did a podcast. It was like a year ago, but you and me personally was maybe.

two weeks ago. Okay. Yeah, so this is kind of finally coming into form, you know, as usual with these things, you know, there's a lot of kind of back and forth behind the scenes, which is difficult to talk about. So if anyone was, you know, they wanted more color or whatever on Twitter, it's, you know, it's not that I'm ignoring it. Far from that. It's just very difficult, you know, when you're talking with management and other stakeholders to give a play-by-play and blow-by-blow, you know what I mean? But now it's all kind of in the public domain. So essentially, the companies decided to return, call it 90% of their excess capital, their cash on hand. So they're going to pay a 40 cents distribution. They've caught, in Australia, the rules I have to call a

meeting for that kind of capital return. That meeting, they said that the documentation calling the meeting will be sent out in July. I assume that means you'll actually get the check. It's going to pass, obviously. You'll get the check in August, so, you know, six weeks or whatever, seven weeks maybe, meaning, you know, stocks at 82 cents today. You're going to get 40. cents cash. That'll be a capital of returns. It'll be no withholding, no nothing. So if you're foreigners, it's totally fine. They are getting a tax ruling from the Australian tax office to confirm that. So that's a bit of a holdup. And thereafter, you're essentially left with essentially the woodside earn out and nothing else, basically. And so, look, I kind of made a few comments

on Twitter. I would reiterate those. Once they've paid out almost all the cash, this really defraised the risk that they're going to do anything idiotic and buy something stupid with the cash. That was the key risk. Stocks rally, but I still get kind of, I mean, it's actually gone up a little bit more since I put out my last math, but probably about a 40% IRA from where we currently trade to where I think is a very, very reasonable low-end valuation on the stub, on the, I should say, on the woodside earner,

which is, I think, about, look, very close to a dollar, maybe slightly under a dollar a share. So basically what's going to happen is the thing's trading at $0.2 a share, you'll get your $0.40. And assuming you trades at $0.42, you have something trading at $0.4. 42 cents for then residual 5 cents of cash and an earn out worth 55 cents basically, between 52 and 57 cents depending on, you know, your assumptions and what they sled for. So is it going to trade at a 35 to 40% discount to the value of the earn out when that earn out is extremely likely to be monetized within six months or less? I guess that's for the market to decide.

I don't think it will. There is no real reason for this entity to exist once they've paid out all the cash. they will monetize the year and out one way or another within the ensuing period. I think the question is less about them doing it now and more about what they get for it and how long it takes. But even then, you still get pretty, I mean, you get very attractive kind of risk-adjusted returns, even if it takes nine months from today. And even if they get, you know, you run it with a 25% discount rate, you still get kind

of like a 30% return. I just going to say that's been such good work on your end. I mean, I think that might have been the first podcast we did, maybe the second podcast we did, but we talked about it. And that was a word that, in my opinion, was very recalcitant to kind of do anything. And you obviously led the charge to here on because they wanted to go buy something, if I remember correctly. They were looking to, they had all this cash. They had to earn out. And they were looking to stay as a going concern. As you said, Insiders don't own a lot of stock. It doesn't make sense to liquidate. It makes sense for them to keep it going so they can

keep collecting a salary. And mainly you led a big charge here to say, no, your stock. is at 50 cents and you've got a dollar of cash and assets, we need to liquidate this sucker. I appreciate it. Look, it's taken definitely longer than I imagine. I mean, look, I first got involved in this early 2022, maybe January, February 22. So it's definitely taken a lot longer than I thought as I'm learning these things tend to do. But it is gratifying to get, I think, the right outcome, maybe on a slightly long timeline, but the right outcome. And to hopefully provide a lot of value for all my compatries along the way. How are you looking at Metcol? days okay that's a good one um look probably not the right guy to ask given i uh called it

pretty wrong i mean look i was one of those guys who thought the chinese reopening would kind of be a lot stronger than it was um calomia dissatisfied commodity built i mean look i've lost the most within my book commodities has obviously been the most pain biggest pain point this year more so met coal more so col than oil to be honest um these things were trading in insanely cheap valuations and guess what spot went down and they're trading it even crazy at cheap valuations that's been so crazy about these things like okay when oil was I'll just use round numbers 100 all I would say every oil company was trading at a price that would imply like oil was trading at 65 right and now that oil's trading at let's call it 70 to make it more fun

but oil's trading at 70 so actually the cash flows that they were trading at where they were trading would have implied a discount even after this 30% job but now all the companies or most of them I follow are trading like oils at 50 or so and it's just like gosh darn it I'm damned if I do damned if I don't and maybe the answer is like these companies there is absolutely a bad capital allocation discount baked into all these things where everybody's worried that managements are going to just blow the massive cash flows they're generating even at these depressed depressedish prices but you're just looking like man what's it going to take for me to make money on these things aside from these companies just like buying themselves out or something I don't know

look i mean i think david ironholm was right didn't he say you're never going to get paid on this stock three rating you're just going to have to get paid on the capital returns they're going to have to pay the dividends you'll get paid on the company eating itself you're not going to get paid on oh this is a coal company it shouldn't trade it one times ebidda it should trade it five times ebidda that's just not going to happen so by the way i never really expected that to happen but i thought it would hold its multiple at you know three times or whatever and no it went So, you know, I own this, this Aussie stock, SMR, Stanmore Coal. I trades it like one and a half times EBIT.

And by the way, that's not on peak earnings anymore because that's on, that's on Met Coal that all of a sudden is like, what, 220 a ton or whatever. It's very respectfully within the long term range at this point, you know, like it's definitely still, you know, upper quartile, but it's not, you know, supernal profits by any stretch. You know, by the way, this is not unique. This is all kind of, you know, Alpha. You can look at Alpha. You can look at Arch, you can look at HCC.

These all kind of trade one to two times EBIT, let's say. One way I like to look at some of these is on an EV per ton basis. And so SMR actually bought these assets from BHP in a deal that was an absolute home run. They bought of their kind of 12, 13 million tons per hour of production. They bought like 80% of it from BHP. So it's essentially an old BHP mine. And they pay, you know, 150. Let's say they paid $150 a ton.

And now the implied EV is like 110 or something, 115. It's crazy that you look at, so the share price is almost invariably are up since the absolute COVID lows. But because these guys have generated so much cash and paid down so much debt, like many of them are actually trading not just at a discount to where they bought their assets when spot was way lower. They're trading at a discount to where they were trading at the absolute depths of COVID lows when people were like, oh, like, you know, economic activity is going to be down 10% forever. And we'll never need coal again because our energy demand is so. so down that we can just use gnat gas or like it is just absolutely wild how cheaply these things have done. And you know, I do think people worry. And I've been saying this for 18 months. People worry, oh, what happens when we hit a recession and demand goes down and prices drop?

It's like that's when you want to wait for the recession to buy these names. And yeah, I guess that might be true. But people forget a lot of these names used to go into recessions with two times leverage. So earnings would go down. So all of a sudden they'd be like 10 times levered. And as an equity player, you'd just be hoping and praying they didn't reach a covenant and need to file or go bank. And now all these guys have like negative two times leverage because a lot of them are net cash or at least they're net neutral. So if you go into a recession, there's no bankruptcy risk anymore, right? So you're talking about very different companies. And yeah, it's just, I mean, you're more in the coal names.

I'm more in some of the oil and that gas names that instead of two times or one and a half times they trade for the shocking multiple of three times EBITR. something, but it's just been, it's been very frustrating. And I, I've been very surprised you have not seen, I understand ESG, but a lot of these are very small. I've been surprised you haven't seen private equity firms come and buy these things out, hedge out the curve, and just mint the cash flows. Yeah, I mean, I definitely think some of that's happened, will happen at some point. I mean, that's, I do think the next Glenn call will get built this way. There is some big bad Dr. Evil type dude who doesn't give to, can I swear on this podcast? I'm not sure if I can. They don't give two fudges about ESG, so they're going to come along and buy up half these companies.

What's interesting to me? I would say two points to add on to what you thought. I agree with most of what you said. I would say two things. One, despite everything you say, I'm not necessarily throwing more capital in these valuations. Because as cheap and as irrational as current prices are, you know, I had some chunky positions and I'm well down. And some of them, having traded a few of the thermal cold names quite well last year. so I'm okay on those, but nevertheless, in McColl, I'm underwater fairly on those,

and I haven't been adding to them, just because the opportunities out there are just crazy and stuff that's much more actionable. Right now, what's the catalyst? The catalyst essentially spot price stabilizes. We do or we don't go into a recession, but spot price prices like that, and they generate tons of cash flow, and we get the cash flow back. I mean, that's great, but, you know, am I going to put, dedicate incremental capital there versus, say, afar, time bound, you know, I mean, of course, completely different liquidity

profile, much small or whatever. So this isn't for everyone, but things like, or something like an alto, where I can either hopefully generate a lot of value through my own work, or just, it seems like it's a much more kind of time-sensitive, time-bound way to not get in and out necessarily, but to kind of extract the value for one of the better word. So things like that, it's a lot of stuff like that to do. Look, this is the nice thing about being Carl icon. You buy the stock and you can go be your own catalyst. That's the nice thing about being Jeremy Rayper. yeah you know what heavy wears the head that wears the crown and all that um but no no it's just there are a lot of these opportunities where uh for whatever reason there's just i just feel like

there's there's a more you know near-term catalyst or ability to get that that latent value out of the equity and into my pocket versus some of these commodity names where let's be honest there's there's a dime a dozen right to your point there's there's a whole swath of canadian enps and US ENPs and gassy names and, you know, coal names. I mean, probably there's like 50 of these names across commodities where they're all trading insane valuations that may as well will move together when things stabilize and picking between them is a little difficult and some will get picked off and maybe we'll be lucky enough to own those, but just a bit trickier, I feel like, in some of the more

special situation stuff that has been very fertile, I should say. I'm not sure if you had any questions on it, but the special situation and stuff has been very, very interesting in the last kind of six, nine months and where I've been for focusing most of my time. And now, a quick word from our sponsor. Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are. And you can access primary research easily and efficiently through their platform.

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spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. Thanks for listening and we'll catch you next time. this is uh did you see lily announced the deal to buy neither of us at any position i can almost guarantee lily announced the deal to buy sigelon this morning did you see this thing no i haven't been watching this thing the stock was trading for four dollars yesterday and lily announced the deal let me see if i got this right i think it's four eleven dollars per share cash plus a cvr it's 1492 per share cash plus a cvr that could be worth like up to a hundred dollars per share the stock went from 4 to 29 overnight.

Anyway, I just mentioned it because you said, oh, you might get lucky to be a takeout. And I was like, man, I would like to be lucky enough to get a takeout like that Sigelon thing. Well, tomorrow win, tomorrow when Valero buys Alto at $8 a share, we can rerun this podcast and laugh at each other. $8 a share plus an earnout for $16 per share, depending on how the 45 Z credits come in.

The ticker there was SGTX, if anybody's interested in that one, by the way. but I strongly doubting there must have a position there. $8 a share plus a voucher for a free ethanol refill at any of the Valero gas stands in California. I love that. Or, you know, if gas prices go back to where they were last year, maybe just fill up your Hummer once or twice. Cool.

Well, hey, Jeremy, it's been over an hour. This has been great. Look, I want to remind everyone, the main focus of this podcast was Alto, as we just ended up talking about. Link to Jeremy's letter will be in the show notes, you know, especially if you have a position. Obviously, Jeremy's going a little bit activist here,

we're neither of us, especially Jeremy, are not trying to form a group or anything. But if you agree with what Jeremy says in his letter, I will just say for him, it would probably be worthwhile to shoot a note to the board. Say, hey, I own 10,000, 50,000, 100,000 shares. I agree. Let's run a market check. Let's at least see, we've got a standalone plan. How's that value measure up against what a strategic would say?

So I will say that for Jeremy. Jeremy, I think this might be a 10th podcast. So I appreciate you coming on and looking forward to the next one, man. Yeah, thanks for having me. It's always a pleasure. I appreciate it. Speak soon. Later, buddy. A quick disclaimer. Nothing on this podcast should be considered an investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.