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May 28, 2019

Look out Beef, It’s Beyond Meat

By Team Stash

The company is the first meat alternative company to go public.

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Beyond Meat recently became the first alternative-meat producer to have an initial public offering, or IPO.

It also had one of the most successful IPOs of 2019 so far, suggesting that investors may be interested in vegan and vegetarian food products that may have less of an environmental impact than traditional meat production, according to some sources.

The company had priced its shares at a range between $23 and $25. On May 2, 2019—its first day of trading—the stock price leapt 164% to $65 a share, according to reports. Since then, the company’s stock has traded as high as $88, and as of mid-day May 21, 2019, it was trading at $78.50 a share.

Here are more details about Beyond Meat, the market it hopes to tackle, and the risks of investing in companies that have recently had IPOs.

About Beyond Meat

Beyond Meat was founded by Ethan Brown in 2009, in Los Angeles, California.

Its products, made from pea protein and other vegetable sources, include vegan sausage and chicken. The Beyond Burger, a veggie burger, is currently sold in grocery stores such as Whole Foods and restaurants including TGI Fridays.

Prior to going public, the company received $122 million in venture capital funding, including money from venture capital firm Kleiner Perkins and the meat producer Tyson Foods, according to sources.

It raised about $250 million through its public offering, and currently has a market cap of $4.6 billion. Beyond Meat will use proceeds from the sale of its stock to expand its facilities, according to its prospectus.

About the meat substitute market

Beyond Meat is one of a small but growing number of meat substitute companies, including Impossible Foods (maker of the Impossible Burger) and Morningstar Farms.

The global market for vegan and vegetarian meat alternatives had sales of roughly $4.2 billion in 2017, according to industry data. U.S. consumers purchased $3.1 billion of plant-based foods in 2017, an 8% increase compared to 2016. By 2025, the plant-based food market is expected to grow to more than $7.5 billion. And, by some estimates, it could grow to $41 billion in the next ten years.

According to a recent Gallup poll, 5% of Americans identify as vegetarians, and 3% are vegans.

Risks to Beyond Meat

In its prospectus filing with the Securities and Exchange Commission (SEC), Beyond Meat reports that it has yet to achieve profitability. In other words, it loses more money than it makes each year.

  • For the full year 2018, it lost $29 million, with revenue (total sales) of $88 million. It also lost between $25 and $30 million in 2016 and 2017, according to its SEC paperwork.
  • Beyond Meat says its expenses will continue to increase as the company expands.
  • Beyond Meat also says it may experience expansion and supplier issues, such as pea protein shortages, that could hamper its growth.
  • At least one analyst predicts the company won’t break even for another five or six years. When a company breaks even, it’s making as much money as it’s losing.

IPOs can be volatile

When a company has an IPO, it’s typical for a newly issued stock to be subject to significant increases and decreases, at least in the short run. That’s known as volatility. Volatility for the stock can be especially high in the first few months following an IPO, and so can the potential for short-term losses as a result.

That’s because investors, analysts, and other stock market participants are often uncertain about the prospects of a newly public company, and that can all factor into the share price. For example, investors typically want to know if a company is worth the valuation it achieved at the time of its IPO. They may also want to know if a company will be profitable in the years to come, or whether it will continue to have losses.

After an IPO, prices may fluctuate due to the expiration of something called a lock-up period, where company insiders such as employees sign an agreement that prohibits them from selling shares for a specified period of time. (In Beyond Meat’s case, the lock-up period is 180 days.) When lock-up periods expire, insiders will often sell their stock in order to realize profit, which can cause the stock price to fall.

Do your homework

It’s important for investors to carefully examine any company whose stock they plan to buy. Remember, as a public company Beyond Meat is required to file paperwork with the Securities and Exchange Commission (SEC) on a regular basis, detailing its financial performance and providing other critical information about the company that investors will want to know about.

That information, which includes a company’s revenue, profits, and losses is available to the general public—meaning anyone can look at it.

You can find out more about the Beyond Meat by looking at its prospectus, a publicly available document on the Securities and Exchange Commission’s website EDGAR.

Follow the Stash Way!

Stash recommends following the Stash Way, which includes regular investing, diversification, and investing for the long term.

Investing for the long term can help insure that you aren’t locking in your losses due to short term fluctuations in the price of a stock.

And remember: All investing involves risk. It’s possible for stocks, bonds, and other securities to lose their value due to changing market conditions.

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