Question

Beyond Meat is the maker of plant-based pork and beef substitutes. The California based company chose to go public this year. The Washington Post wrote that the company had the best market debuts in a year that filled with new IPO offerings. Beyond Meat priced shares at $25 yet opened on the NASDAQ stock market at $46 dollars a share. I would say that the company valued the IPO correctly in that in opened higher than its initial offering value and closed with a 163% premium, around $64 per share (Shaban & Heath, 2019).

While Beyond Meat made history with the biggest IPO debut since the financial crisis of 2008, it has yet to turn a profit. After doubling its 2017 earnings to nearly $88 million in revenue in 2018, the company has lost roughly $30 million over the last two years. Regardless, additional value for shareholders is a given with results like theirs (Shaban & Heath, 2019). Beyond meat closed its first day at a market value of $3.83 billion (Lipschultz & Singer, 2019). The company plans to use the money earned in the IPO to invest in expanding R&D, manufacturing and marketing (Shaban & Heath, 2019).

Competing in the processed food market with large companies like Tyson is no easy task. Particularly since Beyond Meat is offering a product that is unique and maybe a little less main stream. This influenced the IPO because it offers something completely new to the market, playing on our increasingly health-conscious population. In my opinion, Beyond Market exceeded expectations with their IPO and likely shocked people with their results, which will in turn increase their exposure. Although successful in their IPO, Beyond Meat will need to begin turning a profit in order to maintain interest beyond the initial IPO excitement.

For Chegg: explain whether you agree or disagree with the above assessments of my Selected IPO. Can you identify additional economic and market factors that may have influenced the results of the IPO?

Answer 1

I agree with the assessment provided here with regards to the IPO of Beyond Meat. It should be noted that even though the IPO was a huge success (the shares of Beyond Meat debuted with a 163% premium) the future may not be so bright and promising. This is because of a couple of reasons. First of all the company does not yet make profits and hence its free cash flows are negative. The company must turn profitable in the near future and ensure that it is generating positive free cash flows on a sustainable basis. Only this will help in providing support to the share prices of the company. If this does not happen then share prices of Beyond Meat will most certainly take a fall. Thus even though the IPO was a grand success investors looking to make fresh investments in this stock should do so with caution.

The IPO of Beyond Meat was influenced by certain economic and market factors as well which helped with the success of the IPO. The market sentiments were upbeat due to a positive economic outlook. The key economic indicators in USA are positive and the country’s GDP growth rate for 2019 is projected at a good 3%. Levels of inflation are also not high and this also augurs well for the economy as a whole and interest rates are expected to stabilize in future. All these contributed to strong market sentiments. The underlying strength in market sentiments and investor’s upbeat outlook influenced IPO of Beyond Meat in a positive manner.