Shares of Biofuel Energy Corp BIOF.O rose as much as 28 percent in early trade on Friday after hedge fund manager David Einhorn said he raised his stake in the ethanol maker by about 11 percentage points.
Einhorn reported a 36.2 percent stake in the company, according to a regulatory filing on Thursday. He had a stake of 25.5 percent in Biofuel as of June 30.
Shares of Biofuel, which is valued at $19 million, had been down 76 percent this year as the worst U.S. drought in half a century led to lower supplies of and higher prices for corn, hurting ethanol producers' margins.
The drought has also revived the fierce food-versus-fuel debate.
Livestock, food producers and others are calling on President Barack Obama to abandon -- at least temporarily -- a government mandate that requires converting more than a third of the U.S. corn crop to ethanol.
The company's shares rose to $3.69, making them one of the top gainers on the Nasdaq on Friday.
(Reporting by Divya Lad; Editing by Sreejiraj Eluvangal)