When investors look back on 2019, it may well be referred to as the "year of the IPO" due to the host of well-known companies that began trading on the public markets. Ride-hailing giant Lyft, social media player Pinterest, and conference call specialist Zoom Video Communications have all taken center stage. Now Beyond Meat, which develops meat substitutes, is preparing for the spotlight.
Beyond Meat may not have nearly the name recognition of some of its recently public brethren, but it's hoping to change that. It also wants to become a leader among companies working to make plant-based meat substitutes that are virtually indistinguishable from the real thing.
Image Source: Beyond Meat.
Edging closer to its IPO
According to a revised S-1 (its fifth such amendment) released this week, Beyond Meat plans to offer 8.75 million shares of common stock, which it expects to price between $19 and $21 per share. This would value the company as high as $1.2 billion and put as much as $184 million into Beyond Meat's coffers.
The regulatory filing also revealed that the company expects to grant underwriters as many as 1,312,500 additional shares, depending on interest in the stock. If there is sufficient demand for the shares, it could raise an additional $27 million, with the total offering worth about $211 million at the high end of the range. Beyond Meat will be listed on the Nasdaq exchange using the ticker symbol BYND.
The company has not yet set a date for its IPO.
What we know about Beyond Meat's business
Beyond Meat is one of the fastest-growing food companies in the U.S., offering burger, poultry, and sausage substitutes. The company's meat alternatives tap into consumer demand for better "human health, climate change, resource conservation, and animal welfare."
Demand for plant-based protein options has soared in recent years, so much so that Beyond Meat has struggled to keep up with demand. Revenue doubled from $16.2 million in 2016 to $32.6 million in 2017 then grew 170% year over year to $87.9 million -- representing a compound annual growth rate (CAGR) of 133%.
The company continues to lose money as it ramps up production, with net losses of $25.1 million, $30.4 million, and $29.9 million for 2016, 2017, and 2018, respectively.
Competition is struggling to meet the demand
Plant-based meat alternatives have been growing in popularity, and not just among vegetarians. A recent Nielsen Homescan survey found that nearly 40% of Americans say they are trying to eat more plant-based foods. Here are some other indications of a demand for what Beyond Meat offers:
- Impossible Foods -- Beyond Meat's biggest rival -- announced that Burger King would begin testing an Impossible Whopper in some markets. The chain even went so far as to replace the Classic Whopper with the plant-based version on April Fools' Day to gauge customer reactions and film their responses.
- Just weeks later, Del Taco announced that it would be the first national Mexican fast-food chain to offer plant-based meat on its menu with the addition of Beyond Tacos -- made with Beyond Meat.
- Beyond Meat has previously partnered with A&W Canada and TGI Fridays, resulting in the fastest new-product launch in each restaurant's history. In January, the company's plant-based burger rolled out at Carl's Jr. -- the Beyond Famous Star.
- Beyond Meat is now carried by more than 12,000 restaurants and food-service outlets in North America. Its retail products can be found at national chains like Whole Foods, Kroger, and Target.
This growing list shows that the race is on to attain the most high-profile partnerships.
Is Beyond Meat a Buy?
Investing in an IPO is already a perilous affair, but there are factors that can make it even riskier. Like many recent IPOs, Beyond Meat has the dubious distinction of being unprofitable, and even as its revenue has soared, its losses continue to mount.
For those that have been duly warned and still want to take the plunge, it's also important to remember that newly minted public companies tend to be extremely volatile in the weeks and months after their debut. Lyft perfectly illustrates the volatility investors can experience: Even though the stock price ended its first day up nearly 9%, it has fallen as much as 25% in the three weeks since it began trading.
Forewarned is forearmed.
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John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors. Danny Vena has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.