Pacific Ethanol may lose investor

Cascade Investment LLC, a firm owned by Microsoft Corp. Chairman Bill Gates, may sell its 21 percent stake in Pacific Ethanol Inc., which has lost almost two-thirds of its market value this year.

Cascade will convert its preferred stock to 10.5 million common shares and may offer them for sale, according to a Pacific Ethanol filing with the Securities and Exchange Commission. At Friday's closing price, Gates lost $24 million on the investment. He paid $84 million for his stake in 2005.

Pacific Ethanol, based in Sacramento, Calif., has fallen 63 percent this year in Nasdaq stock market composite trading, as the burgeoning supply of the fuel additive drove prices down 25 percent. The company recently reported a third-quarter loss of $4.8 million.

The filing is "nothing other than optionality," Pacific Ethanol Chief Executive Neil Koehler said in a telephone interview. Cascade asked Pacific Ethanol to make the SEC filing, Koehler said.

Cascade may sell the shares from "time to time," Pacific Ethanol said in the filing. Gates bought the preferred shares two years ago to help the company finance construction projects on the West Coast.

Pacific Ethanol fell $1.27, or 22 percent, to $4.43 Monday.

Pacific Ethanol produces about 80 million gallons of the additive annually at its plants in Madera, Calif., and Boardman, Ore. The company owns a 42 percent stake in a 48 million-gallon plant in Windsor, Colo.