How A Renewable Energy IPO May Have Rekindled Nanotech (SZYM, TINY, LMT, PXN)

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How does a renewable energy company’s IPO relate to possibly rekindling interest in the tiny sector of nanotechnology?  Actually, there is a deep tie now.  Solazyme, Inc. (NASDAQ: SZYM) is a renewable oil and bioproducts company that has now only been public for two trading sessions.  The company also claims to be a leader in industrial biotechnology.  What is interesting is that Solazyme may have inadvertently gotten nanotech back on the investment map.  The South San Francisco company’s technology allows microbes to produce oil and biomaterials in standard fermentation facilities quickly, efficiently and in large scale for biofuel production, fossil petroleum, plant oils and animal fats from clean fuels and chemicals to cosmetics and foods.  The IPO was just last week and it has traded higher, and a business development company (venture capital investor) that trades almost like a closed-end fund called Harris & Harris Group, Inc. (NASDAQ: TINY) is a large holders of Solazyme.

Solazyme priced its IPO of 10,975,000 shares at $18.00 per share and Harris & Harris invested into the company back in 2004.  Its preferred shares were converted in 2,304,149 common shares with a carry of just over $10.00 per share.  Solazyme closed at $20.71 last Friday and closed at $22.53 on Tuesday.  It was also announced last week in a grouped portfolio announcement that another portfolio company, privately held D-Wave Systems, Inc., was given an order from Lockheed Martin Corporation (NYSE: LMT) to purchase a quantum computing system from the company. It was just recently that Harris & Harris gave a performance update with a net asset value as of March 31, 2011 at $146,632,745 and $4.73 per share.  Shares closed at $5.73 on Tuesday but this was at $4.95 less than two weeks ago.  It was the Solazyme IPO that contributed to much of the excitement here.

You have heard that “there is an ETF for that” and the same can be said for nanotech if you look at the PowerShares Lux Nanotech (NYSE: PXN) ETF.  Harris & Harris is actually the ETF’s third largest position with a 7.3% weighting.  This ETF trades at $9.21 versus a 52-week trading range of $7.74 to $10.62, but it only trades about 15,000 shares per day.  Still, it is up 3% to 4% in the last week.  The Lux offering was also featured as one of our top ETF trends for investing like a futurist.

So, if you are wondering how all of this ties together it is simple.  Nanotech, or at least small technology, continues to offer many great products in the years ahead and even today.  Harris & Harris won from this investment in Solazyme, but generally these “hidden-IPO-holdings” trades start to see some profit taking going into the IPO rather than just after and that appears to be the case as it peaked two days last week at $5.92.  If computing, engineering, biotech, drug delivery, chemicals, and many other industries can use nanotech, then there is going to continue to be a steady news flow on the subject for years and years.

To get an idea of just how small nanotechnology is, it is generally manipulation of matter on an atomic and molecular scale that deals with structures sized between 1 to 100 nanometers in at least one dimension.  1 nanometer is one-billionth of a meter.  The definition of true nanotech has changed to include many small

JON C. OGG