Beyond Meat Raises $240 Million From IPO Despite Underlying Concerns
Since going public Beyond meat Inc.’s (NASDAQ: BYND) shares have been surging with the company raising close to a quarter a billion to advance its vegan meats. The Beyond Burger maker prices its shares at $25 o the IPO and managed to raise $250 million.
The company plans to offer around 9.5 million shares at a price of between $23 and $25. Proceeds from the IPO will go into expanding manufacturing facilities, invest in R&D as well as boost marketing and sales. Although Beyond Meat appears to be, here are some things you should know ahead of the IPO.
Beyond Meat yet to make profit
Despite successfully growing its revenue over the past, Beyond Meat has never turned a profit. In the first three quarters of 2018, the company reported revenue of $56.4 million more than the $32.6 million recorded for FY2017. Net loss in the three quarters was $22.4 million, which was less than $23.4 million reported the previous year. For FY2017 loss widened to $30.4 million compared to $24.1 million in 2016.
The expansion efforts seem to be expensive, which render the company unable to increase revenues and margins adequately to offset expenses. Beyond will not be offering investor dividends in the near-term, which means investors will depend on stock gains to get returns.
Beyond Meat is over ambitious
The company is hoping that alternative Meat will grow to be a multi-billion market that will overshadow the current $1.4 trillion meat market. There are plans to replicate the plant-based dairy products strategy that is around 13% of the current dairy industry.
Employing the strategy could enhance the alternative meat market to around $270 billion of the global meat market. Beyond Meat has launched in Europe through contracted distributors and restaurant chains and grocery stores in Europe are showing interests.
A lot of competitors
Beyond Meat has a number of competitors, although alternative Meat may appear to be a niche market. Competitors include Impossible Foods, Boca Foods, Lightlife, Gardein, Morningstar Farms, Tofurky and Field Roast Grain Meat Co. as well as traditional meat enterprises such Tyson Foods Inc., Cargill, WH Group and Hormel Foods.
Most of the rival companies are established with more resources and money as well as broadly recognized products among consumers. This means that they can offer conventional Meat to consumers at affordable costs leading to Beyond Meat lowering prices, thus affect profitability.
Reliance on one ingredient
Beyond Meat uses pea protein to produce its meat alternatives, and it has a single supplier. The company has already experienced interruptions from the supplier as a result of delayed delivery. Pea price depends on a number of factors and can be affected by poor harvest and changes in economic situations.
No signed agreements with co-manufacturers
Most of Beyond Meat’s returns come from products of co-manufacturers such as FLP Foods and CLW Foods. However, there is no written agreement between the companies, which means they can terminate the relations at any given time. Beyond Meat is currently embroiled in a lawsuit with Don Lee Farms for wrongful termination of contract and sharing of trade secrets with current co-manufacturers.