Beyond Meat IPO 30x oversubscribed as financial losses, Tyson exit fail to faze investors

UPDATED May 2, 2019: Includes stock market debut.

Plant-based protein company Beyond Meat made its debut on the Nasdaq stock exchange today after pricing its initial public offering at the top of the $21 – $25 a share price range it offered investors. This raised $240 million for the company and valued it at $1.46 billion.

It later surged 135% in its stock market debut valuing the company as high as $3.52 billion. It was trading around $62 when we posted this update.

Beyond Meat had already increased the price range of the deal, which was oversubscribed by 30 times — meaning investors placed orders for 30 times more shares than there were for sale — from $19 to $21 earlier in the week.

Venture investors in Beyond Meat will be keenly watching the stock price for the next 180 days after which they will be able to sell their stakes and calculate their returns. They include S2G Ventures, Powerplant Ventures, Bill Gates, Leonardo Dicaprio, and former McDonald’s CEO Don Thompson.

Unfazed investors

The strong investor demand came despite a history of financial losses at the company, according to a recently amended S-1 filing; Beyond Meat posted net revenue of $87.9 million in 2018 and a net loss of $29.9 million.

Despite the grim financials, the company anticipates that demand for its product will accelerate domestically and abroad as it targets meat-eaters and flexitarians with its plant-based alternatives, taking on the $1.4 trillion global meat industry.

Its products, including the Beyond Burger, the Beyond Sausage and Beyond Beef Crumbles, are available at roughly 30,000 locations according to the company, including several fast food outlets like Carl’s Jr., NYC’s Bareburger, Qdoba and Del Taco. Through a distribution deal with Sysco, Beyond Meat has landed its burger on menus at over 11,000 restaurants including TGI Fridays as well.

The Good Food Institute, which champions plant-based and cell-cultured meat research and development, commended Beyond Meat as a “pioneer of the plant-based meat movement” in a press release circulated via email this morning.

“The listing is an extremely rare exit strategy in the highly centralized food industry and is almost unheard of in the plant-based food space. The only known exit of this kind was WhiteWave Foods’ initial public offering in 2012. This strategy raised $391 million for the plant-based food company and positioned it for a $12.5 billion acquisition by Danone five years later,” said Good Food Institute executive director Bruce Friedrich.

Troubling Tyson exit

There were signs of potential trouble for the IPO last week when reports broke that Tyson Foods had ended its investment in Beyond Meat, selling its 6.52% share to an undisclosed buyer. Rumors circulated about the reason for the split with some citing Tyson’s efforts to create its own line of private label alternative protein products as the likely culprit.

“Tyson Ventures is pleased with the investment in Beyond Meat and has decided the time is right to exit its investment,” a Tyson spokesperson told Food Dive in an email. “Beyond Meat provided an early opportunity for Tyson Ventures to invest in plant-based protein products that many consumers are seeking. We wish the leadership of Beyond Meat all the best.”

But the announcement clearly did not deter any IPO investors, or aftermarket investor.

Direct competitor Impossible Foods has been making similar strides in bringing its plant-based meat replacements to market. The Californian startups recently inked a deal with Burger King to bring the Impossible Whopper to Burger King outlets across the US. Red Robin recently added the Impossible Cheeseburger to its menus at 5,000 restaurant locations, while the Silicon Valley-based company plans to launch packaged versions of its burger in grocery stores later this year.

Impossible Foods has faced its own roadblocks, initiating a voluntary recall of its product in April 2019 after pieces of plastic were found in a shipment of burger mix. It’s also been the subject of heavy scrutiny from the FDA over its main ingredient. Impossible Foods uses genetically modified yeast to create soy leghemoglobin, which it calls “heme,” that makes the burger “bleed” and provides the meat-like flavor, according to the company.

More foodtech IPOs?

FoodTech has matured as a venture capital industry, attracting billions of dollars of venture capital investment: over $17 billion in 2018. And investors are starting to see some exits, including at IPO.

Most recently, Precision Biosciences, a gene-editing company with a food-focused subsidiary, IPO’d at a valuation of $870 million in March 2019, giving Pontifax AgTech its second exit in the sector.

Other foodtech startups hinting at IPOs in the next few years include MycoTech, the novel ingredients company using fungi to replace unhealthy ingredients like sugar. The startup raised a $30 million Series C from a heavyweight list of investors in January and hinted at an IPO in 2021. Postmates raised $100 million in pre-IPO funding for the expansion of its online food delivery service that same month.

In December 2018, Canadian Food-X graduate eGrocer SPUD raised $8.2 million in pre-IPO funding while Farmer-to-farmer digital network Farmers Business Network has also hinted at an IPO potentially happening sometime between 2019 and 2023.

IPOs haven’t always been a success story for food companies. Meal kit maker Blue Apron went public in June 2017 at $10 per share and a company valuation of $2 billion. The IPO priced well below its initial estimation of $15 a share and shares eventually fell below $1 in December 2018. Some attribute the rocky road to Amazon’s acquisition of Whole Foods only two weeks before Blue Apron’s IPO. By its first quarterly report, Blue Apron reported losing 9% in its client base.