Gevo (NASDAQ:GEVO) is attempting to commercialize the next generation of renewable, low-carbon, liquid transportation fuels. As a glance at a longer-term chart of GEVO stock would show you, its efforts have not been going well.

Gevo has chosen a bold mission. The company states that its “hydrocarbon transportation fuels have the advantage of being ‘drop-in’ substitutes for conventional fuels that are derived from crude oil, working seamlessly and without modification in existing fossil-fuel based engines, supply chains and storage infrastructure.”

It sounds like Gevo’s fuels can become a silver bullet in the fight against climate change. Carbon-free fuels that are able to work in conventional engines would be a total game-changer.

Gevo is pursuing the jet fuel market. If the company’s efforts in that sector are successful,  it would generate a tremendous amount of revenue and profits.

It’s possible to make millions of electric cars and trucks. But given the limitations of battery technology, jetliners probably will not be equipped with them anytime soon. If Gevo could really create jet fuel that contains little or no carbon and work in existing engines, it would be an amazing feat.

The Economics Are in Doubt

Gevo has demonstrated that it’s technically capable of producing various biofuels, including jet fuel. It’s often possible for companies to develop products at very high costs. For example, using particle accelerators, nuclear physicists can in fact transform lead into gold. However, the cost of doing so is far higher than the commercial value of the gold. As a result, the process is an interesting scientific footnote  with no real-world implications.

Unfortunately, many types of green energy are in similar situations. It’s one thing to turn plant matter into a substitute for gasoline or jet fuel. It’s quite another to do so for an affordable price.

Every year since 2012, Gevo’s gross margin has been negative. Consequently, it costs the company more to produce its fuels than it earns from selling them. Needless to say, that is not a particularly sustainable business model.

So if Gevo loses money on the fuels that it sells (even before accounting for corporate overhead and interest), how can it survive? It must use gigantic amounts of share dilution to stay afloat.

Gevo Is Great at Selling More Shares

While Gevo’s biofuels efforts have been disappointing, its ability to produce more shares of its own stock are unrivaled. In fact, it is one of the biggest, most consistent sellers of its own stock on the Nasdaq today. And that’s led to painful declines by GEVO stock.

A long-term stock chart doesn’t tell you everything about a company, but it can give you a big clue about its performance. If a stock  has lost nearly all its value over the years, that’s usually a huge red flag.

The chart of GEVO stock screams danger. In 2011 (on a reverse split-adjusted basis), its share price was as high as $151,000. It’s now changing hands for around $5.60, so it’s lost more than 99.9% of its value over the past decade.

That isn’t just ancient history. GEVO stock still traded north of $100 as recently as 2016, but managed to wiped out nearly all of that value.

Not surprisingly, that huge decline was largely due to share dilution. In 2018, Gevo had fewer than 5 million shares of outstanding stock. It now has as much as 200 million shares.

Simple supply and demand rules state that if the quantity of outstanding stock jumps forty-fold, it’s only natural that the value of each share will be diluted away to nearly nothing.

The Verdict on GEVO Stock

The first step in building a successful business is to manufacture a product that people want. And normally, when you produce a good, you sell it to customers at a higher price than it costs you to make. I know; that’s Economics 101.

Unfortunately, Gevo has failed even this most basic test. In 2019, for example, Gevo spent $36 million on production and generated sales of $24 million.

Last year was even worse, but Covid-19 was a valid excuse for its poor performance in 2020. However, the last year that Gevo generated a gross profit was way back in 2011. In other words, Gevo is a glorified science experiment that is being funded with retail investors’ money.

I have no issue with venture capital (VC) shops backing this sort of company. They know the sorts of risks that they are taking by funding cash-burning machines that are chasing unlikely technological breakthroughs.

Needless to say, however, GEVO stock is wholly unsuitable for most investors’ portfolios. If you must trade a name like Gevo, only do so with funds that you wouldn’t mind losing.

As Gevo’s past history shows, the stock can lose virtually all of its value as management continues issuing new shares by the millions.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.