We detected a large dark pool buy order in REGI stock on Friday, January 3, 2020. The large print that came off the dark pool looks like a clear buy order IMO.
REGI stock immediately rose after the dark pool print, in fact, it marked the low of the day for the stock. This suggests it was a buy order coming off the dark pool.
We also detected bullish options flow in REGI stock with a large $18K call order with a $30 strike.
The dark pool buy order could be Roth Capital or a large client they manage money for because on January 3, 2020, Roth Capital analyst Craig Irwin raised his price target for Renewable Energy to $33 from $22 and maintained a Buy rating. In a research note to clients, Irwin says he is adding the benefit from the reinstatement of the $1/gallon blenders tax credit to his forecast, saying he expects around $150M of BTC cash will be used for share buybacks, with $150M for strategic RHD expansion projects and the remainder for balance sheet remediation.
The dark pool print could also be tied to Piper Jaffray analyst Patrick Flam who raised his price target for Renewable Energy to $41 from $32 following the recent passage of a long-term BTC extension, which he called “a huge boon to the biodiesel industry.” He believes the influx of cash from the BTC over the next several years should position Renewable Energy for success in both the traditional biodiesel and renewable diesel markets and should also let the company strategically deploy capital back to shareholders, said Flam, who keeps an Overweight rating on the stock.
On December 20, President Trump signed into law reinstatements and extensions of a set of tax provisions, including the retroactive reinstatement for 2018 and 2019 and extension for 2020 through 2022 of the federal biodiesel mixture excise tax credit, Renewable Energy Group pointed out in a regulatory filing. With respect to the business of the company conducted in 2018 and in the first nine months of 2019, the amount of the retroactive credit is estimated to result in an aggregate net benefit in the range of $440M to $470M. The aggregate net benefit for the aforementioned period, which will be recognized in Q4, will increase Renewable Energy’s pre-tax operating earnings by a similar amount, the company added.
Renewable Energy President and CEO CJ Warner issued the following statement upon President Trump’s signing of legislation which included a retroactive reinstatement and extension of the $1 per gallon Biodiesel Tax Credit, or BTC, from January 1, 2018 through December 31, 2022:
“Friday’s news represents a big win for the environment, for agriculture, and for US motorists. For too long the biomass-based diesel industry has been held back from showing its real potential due to the recurring uncertainty around the BTC. Now, thanks to the work of biodiesel champion lawmakers, we can accelerate our strategy and further deliver at scale the enormous benefits of biodiesel and renewable diesel…As we look to the future with this supportive policy, we are committed to delivering value to our stakeholders, including our customers and shareholders, through a balanced approach to capital allocation focusing on high quality, high returning investments, including share and bond repurchases that will strengthen the company and our ability to deliver high quality, low carbon fuels. The proceeds from the BTC provide tremendous, predictable resources to support achievement of these goals.”
On December 23, 2019, BWS Financial analyst Hamed Khorsand raised his price target on Renewable Energy shares to $58 from $31 as he estimates the company should receive approximately $500M in the next three months plus $900M over the remaining three years of the current extension of and the retroactive approval of the biodiesel tax credit as part of the passage of the appropriations bill. Renewable can possibly use the cash to buy back debt and stock, said Khorsand, who keeps a Buy rating on the stock.
On December 17, 2019, BWS Financial analyst Hamed Khorsand said the Congressional budget has been amended to include the biodiesel tax credit, which sets up Renewable Energy for the best outcome possible from the federal budget negotiations. Under the proposed amendment, the credit would be retroactively approved until the end of 2022 at the rate of $1 per gallon of 100% biodiesel produced, noted Khorsand, who estimates Renewable Energy would get approximately $500M for the gallons produced in 2018 and 2019 and will have a clear pathway to generating BTC dollars over the next three years. He keeps a Buy rating on Renewable Energy shares, noting that his existing $31 price target was estimated without taking into consideration BTC in his valuation.
The last week in January or the first week in February is typically the strong time of year for REGI stock like most Energy sector stocks. The dark pool buy order and bullish options flow could be traders front-running the seasonally strong time of year for REGI stock. If that’s the case, we would expect to see more front-running over the coming days and weeks.