Beyond Meat’s 163% Post-IPO Bounce Best US Stock Market Debut Since 2000
Beyond Meat, the Silicon Valley ‘foodtech’ start-up whose burgers promise a genuine plant-based alternative to beef has recorded the best stock market debut of any US company in almost 20 years. The IPO sold 9.63 million $25 shares to raise $241 million at a valuation of $1.5 billion. However, by the end of the company’s first day of trading on the Nasdaq exchange, Beyond Meat’s valuation had hit $3.8 billion following a 163% gain to $65.75. Trading had opened at $46, delivering a whopping 192% return to the institutional investors able to participate in the IPO.
Beyond Meat now stands as the most successful market debut raising at least $200 million on U.S. stock exchanges since the 2008 financial crisis. Across the world in 2019, only a small handful of IPOs have seen a bigger bounce on their first day of trading and none raised more than $22 million.
Backed and promoted by a clutch of celebrities such as Leanardo DiCaprio and Microsoft boss Bill Gates, the rush for Beyond Meat shares yesterday appears to have been driven by retail investors locked out of the IPO. There is a surge of popular approval for what Beyond Meat stands for – vegan faux meat products that actually compete with real meat on taste and experience. Significantly reducing global per capita meat, particularly beef, consumption is considered a key component in the battle against climate change. Meat production is one of the world’s biggest sources of polluting emissions.
Numerous blind taste tests have seen tasters rank Beyond Meat patties and sausage meat ahead of actual meat alternatives. The company have invested huge sums into R&D in their efforts to replicate the taste, smell and texture of meat using only plant-based products. And, along with competitor Impossible Foods, appear to have had success. Many dedicated meat eaters who have tried Beyond Meat’s products say they would happily eat them as an alternative to actual meat.
Investors are, however, still making a leap of faith by investing in Beyond Meat at its current valuation. The company is still loss making and now faces the challenge of international expansion and coming up with products that will work in other parts of the world where burgers and sausages aren’t as popular as in North America. However, Beyond Meat has tapped into a quickly growing market. U.S. supermarket sales of meat alternatives grew almost 20% over the year ending January 5th according to market researchers Nielsen. As well as supermarket sales, Beyond Meat’s burgers are offered by several major restaurant chains, including TGI Fridays.
Beyond Meat does seem to have a clear path to profitability. The company has doubled its revenues in each of the past two years and last year losses were $29.9 million on revenue of $87.9 million compared to a loss of $30.4 million on $32.6 million revenue over 2017. Revenues could have been significantly higher last year were it not for severe shortages in supply. Beyond Meat will invest its IPO windfall in beefing up, pardon the pun, its production capacity, supply chain and international expansion.
The potential of the latest technology in the world of faux meat is demonstrated by the fact that one of Beyond Meat’s biggest early investors was Tyson Foods, the U.S.’s biggest meat producer. The company has, however, since sold its 6.5% stake, which could be considered a strange move on the presumption its initial investment was hedging its bets on a new challenge to its core market.
The success of Beyond Meat’s market debut raises inevitable questions around whether the company didn’t undervalue its IPO. However, if investors are to see sustainable long term returns, Beyond Meat’s work starts now. The food tech start-up has had a great beginning to life as a public company. Now it has to turn that optimism into a serious, international business. If it manages to do so both investors and the planet stand to gain.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.