Bill Gates Slashing Stake in Pacific Ethanol

Bill Gates is making good on his plans, announced last November, to sell off his 20.6 percent stake in Pacific Ethanol.

Cascade Investment, the private investment and holding company controlled by Gates, has been whittling down the stake trade by trade, according to recent filings with the SEC.

The latest round of selling began with the sale of 300,000 common shares into the market on May 28 . The next day, Cascade converted 1 million shares of preferred stock into 2 million shares of PEIX common stock worth $8 a share each.

Cascade then began to immediately sell those common shares off at a huge discount – in the market, investors paid between $3.40 and $3.75 a share for them. By last Friday, Cascade had sold off a total of 1.4 million shares in three days, or roughly $5 million worth of Pacific Ethanol stock.

The sales came only a few days after Pacific Ethanol reported surprisingly strong earnings for the first quarter, only to erase most of the stock gains with an announcement it would dilute investors with a new stock offering. It seems that Gates may want to cash out some of his stake in Pacific Ethanol before that dilution took effect, even if it meant selling below the $8 a share price that he converted his shares at.

Earlier, in April and May, Cascade had sold more than a million shares in the market, between $3 and $4 a share. All told, Bill Gates has come close to cutting his stake in the company in half over the past several weeks.

A Sacramento Bee story quoted Pacific Ethanol CEO Neil Koehler as philosophical about the steady stock sales from what was its largest investor.

[Gates’] original stake was 20 percent, and “he’s well on his way to 10 percent,” Koehler said. Gates’ $84 million investment in 2005 was a big early boost to Pacific Ethanol, but Koehler said he isn’t particularly bothered by Gates’ recent sales.

“That’s the great thing about markets; people are free to buy and sell,” he said.

These days, they are a little freer with their sales. Pacific Ethanol closed Tuesday down 4 percent at $3.30.