North America IPO: Beyond Meat’s US$276.7m IPO

IFR Awards 2019
3 min read
Robert Sherwood

Where’s the beef?

Beyond Meat’s IPO relied on a vegan vision for the future. Ethan Brown, founder and CEO, evangelised on the health and ecological benefits of his products during eight days of marketing to more than 350 accounts.

His message dovetailed nicely with the objectives of an emerging class of environmental, social and governance investors.

Best known for its Beyond Burger, a pea-based burger that mimics the look and taste of meat, Beyond Meat is building its company as part of a global sustainable food system for decades to come.

“Beyond Meat has redefined its industry with a brand that has captured the imagination of consumers, the media and investors,” said Stephen Pierce, Goldman Sachs chairman of global ECM.

“This IPO was a branding event unlike any other that I have been involved with.”

Beyond Meat was still unprofitable when Goldman Sachs, JP Morgan and Credit Suisse began marketing in April. A target valuation based upon forward sales is common among software IPOs, but not food.

Yet when the shares began trading the company was valued at 11 times EV/revenue for 2020, above high-growth consumer names like Canada Goose (then at 6.4 times) and Lululemon Athletica (5.1 times).

The IPO launched with 8.75m shares offered at US$19-$21 each, with Pierce remembering some “tough discussions” with investors that had bought at US$24.23 the previous November. In the event 9.625m shares were priced at US$25, above the final private round and at the top of revised US$23-$25 guidance.

Beyond Meat shares shot to US$65.75 on day one and had peaked at US$239.71 by late July. Such was the enthusiasm for its shares that on the first day of trading turnover in the stock was US$1.3bn.

Not surprisingly the 15% greenshoe was exercised in full, increasing the deal size to US$276.6m.

The first secondary offering followed within three months. The banks mitigated some of the threat of a future mass selloff by letting the pre-IPO investors take profits well within the lock-up through a US$520m secondary offering.

The sale did not eliminate the overhang. Beyond Meat shares traded heavily in anticipation of the October 29 lock-up expiry and plunged below US$80 on heavy insider selling.

That performance is still impressive considering the enormous losses from other high-growth IPOs such as Uber, Lyft and Peloton this year.

Beyond Meat is not worried.

The company reported third-quarter net profit of US$4.1m on US$92m of revenues and raised full-year guidance to US$265m-$275m.

McDonalds also began testing the Beyond Burgers in Canada in October as a sandwich called the PLT (plant, lettuce and tomato), which could mean a potential US$400m revenue stream if successful.

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