Time is risk and this becomes a considerable factor for any company's stock price that is in the commercialization stage, during scale up and just before the serious revenue streams begins to book.
MAY-27-2011: Solazyme had a strong IPO, selling 11 million shares at $18 each to raise about $198 million. The IPO is noteworthy because Solazyme is the first algae-to-fuels company of real stature to list on a major public market. In the first day of trading shares rose above $21 before closing at $20.71.
July-15-2011: SZYM stock price hits all-time-high of $27.42
Aug-7-2012: Shares of SZYM are available at $13.63 (50% lower than the high from a year earlier), yet on the 2012 Q2 Conference Call Solazyme Executives announce that the company continues to meet all milestones, and looking forward they expect:
1. Solayzme Roquette Nutritionals JV is making progress in a number of areas. Construction on the Phase II 5,000 metric ton facility in Lestrem, France is moving forward smoothly and we expect the plant to be operational in Q2 of 2013.
2. The Bunge joint venture is off to a strong start. The project is on track, and consistent with our previous guidance. We expect the plant to become operational in Q4 of 2013. our goal is to drive revenue from that plant so as a practical matter and to do it when the plan comes online. So that certainly is a goal for the end of 2013 to be generating revenue out of that plant. And just to be clear that there are plenty of things that we’ve done from a technology standpoint that allow us to get that plant running when it comes up regardless of some of the cycles of cane planting season.
In less than 5 months, Solazyme's new fiscal year will commence (FY13) which will see 2 major commercialization milestones achieved with substantial revenues being booked (in addition to Algenist product sales).
Risk is inherent in construction projects of all types and sizes. It has many causes and its effects manifest themselves in various forms. Most recognizable are impacts on the schedule, where they reduce float, i.e. its flexibility to absorb delays and thus mitigate risk. Regardless of the nature of risk, it is measurable by its effect.
Therefore when considering a dynamic timeline model of pricing, as the timeline shrinks for Solazyme to begin substantial monetization of its tailored oils, the risk also diminishes --> When tracing the timepath of relative risk, where you have T-1, exponential smoothing will result in a an increase in the Stock Price.
In conclusion, at the time of IPO SZYM was over 2 years away from large online capacity and the realization of substantial monetization. Now they are 12 months away. After hitting all milestones since IPO, one would expect shares to be trading with a significant premium (maybe closer to the July-2011 high of $27), yet are now available at a 25% discount.
There were no fireworks on the conference call. Just another solid performance buy Jonathan and Tyler providing insights into the overall strategy: Chemicals, Nutritional, Health Sciences, and Fuels (think high margin blends).
I've been following sz for about 6 months now and started a wee position over that time. (If they were only a fuel company I'd still be on the sideline). In a way, boring was exactly what I too was looking for. Execution on all projects is clicking along and they are moving product. All is well. Call me a simple man.
Your point about short-term development problems is well taken. A retail investor should understand that the implementation of novel tech is inherently problematic - so don't freak out and sell everything if they miss production deadlines by 20% (fwiw that's my unscientific rule of thumb).
For me the GRAS and oil stability are the most compelling near-term story. Think - Nabisco, Kraft, McDonalds, KFC need I say more?