Beyond Meat doubles in market debut after $241-million IPO

Beyond Meat Inc. more than doubled in its trading debut after raising $241 million in an upsized initial public offering that priced at the top of the marketed range.

Shares of the maker of vegan beef and sausage substitutes opened at US$46. They rose 114 per cent from the offer price to US$53.60 at 12:24 p.m. in New York, giving the company a market value of US$3.2 billion.

Beyond Meat sold 9.63 million shares for US$25 each on Wednesday, after marketing them for US$23 to US$25, according to data compiled by Bloomberg.

The company, backed by business and Hollywood celebrities including Microsoft Corp. co-founder Bill Gates and actor Leonardo DiCaprio, originally planned for a smaller share sale to raise only US$184 million at the top of a US$19 to US$21 share price range.

Chief Executive Officer Ethan Brown doesn’t expect a conflict between making environmentally based decisions and those that serve shareholders.

“Consumers are looking for products that enable them to be healthier and reduce their footprint,” he said in an interview. “Every time we’re making a sale we’re furthering our mission and increasing sales.”

One food-industry consultant said investors are taking a lot on faith with money-losing Beyond Meat.

Monitors display Beyond Meat Inc. signage during the company’s initial public offering (IPO) at the Nasdaq MarketSite in New York, U.S., on Thursday, May 2, 2019. Beyond Meat Inc. more than doubled in its trading debut after raising $241 million in an upsized initial public offering that priced at the top of the marketed range. Photographer: Michael Nagle/Bloomberg via Getty Images

The company’s valuation in its IPO is “entirely reasonable if it’s got internationalizable potential and a great product, and has capacity to make money in its core profit structure,” said Robert Lawson, chief executive officer of London-based Food Strategy Associates. “But it’s not clear that Beyond Meat is that.”

The company will need to expand its product range to succeed outside the U.S., where burgers aren’t as popular, Lawson added.

Meat Alternatives

Consumers are looking for more plant-based meat alternatives because of concerns about health, animal welfare and the environment. Startups like Beyond Meat are tapping into that demand by offering beef-like versions of the veggie burger and other meat products.

Supermarket sales of meat alternatives surged 19.2 per cent to US$878 million for the year ended Jan. 5, according to data from Nielsen. The field is crowded, with Silicon Valley-based Impossible Foods also placing its meatless burgers in thousands of restaurants, including all Burger King locations. Nestle SA makes a plant-based Incredible Burger, which is available in McDonald’s Corp.’s German locations.

Beyond Meat is sold in grocery stores nationwide and is also increasingly being featured on restaurant menus, including TGI Fridays and Carl’s Jr. and now under a new deal with Del Taco Restaurants Inc. Its burger patties, with no cholesterol and 5 grams of saturated fat, are made of pea protein and beet juice, which makes them “bleed” when cooked. That compares with 80 milligrams of cholesterol and 9 grams of saturated fat for a 4-ounce patty of 80 per cent lean beef.

We will make trade-offs that make sense for the product and market instead of the most environmental path

Beyond Meat CEO Ethan Brown

And despite the company’s mission, Brown said the company will choose the customer over the planet when necessary.

“Our packaging is not great,” he said, referring to the plastic wrap. “That runs counter to what I believe in in terms of ability to recycle things and the overall footprint of that packaging, but we care about the quality of the product. So we will make trade-offs that make sense for the product and market instead of the most environmental path.”

The company’s 2018 loss shrank, while its revenue more than doubled for the second year in a row, according to its filings. Last year, it lost US$29.9 million on revenue of US$87.9 million compared with a 2017 loss of US$30.4 million on revenue of US$32.6 million.

McDonald’s Ex-Chief

Its investors include former McDonald’s Chief Executive Officer Don Thompson and venture capital firm Kleiner Perkins Caufield & Byers LLC, which owns 16 per cent of the company, and Twitter Inc. co-founder Ev Williams’s Obvious Ventures with 9 per cent, according to its filings.

Its backers had included Tyson Foods Inc., the largest U.S. meat producer. Tyson sold its 6.5 per cent stake in Beyond Meat, according to a statement in April. Tyson’s shares were sold both to insiders and new shareholders, Brown said.

The offering was led by Goldman Sachs Group Inc., JPMorgan Chase & Co. and Credit Suisse Group AG. Beyond Meat trades on the Nasdaq Global Market under the symbol BYND.

Bloomberg.com

Published at Thu, 02 May 2019 16:53:41 +0000