A couple weeks ago, I started following Beyond Meat (ticker: BYND), a plant-based meat producer based out of Los Angeles. This profitless company, IPOed on May 1, 2019 at $25 a share, raising an estimated $240 million and garnering an initial valuation at $1.5 billion. Today, June 13, 2019 the stock has hit a high of $146 and currently trades at $141.39. This is a 565% increase from its IPO price of $25. Initially, my gut was telling me to short the stock. A current $8.12 billion market cap and 565% price increase, in under roughly a month and a half, seems utterly ridiculous, but I’m very hesitant about placing any short or put anytime soon for two important reasons.
Issue number one at hand is that BYND has 57.43 million shares outstanding and a small float of only 4.4 million shares or 7.66%. A small float, such as the case in BYND, can cause volatility from both large upward and downward price swings due to potential illiquidity. This alone makes the current situation to risky for my liking, but another factor that’s referred to as Green Finance, which I believe is the real root of BYND’s recent meteoric rise and why I hesitate to short BYND.
Green Finance, according to Climate Mundial, is “any financial instrument or investment – including equity, debt, grant, purchase & sale or risk management tool (for example: investment guarantee, insurance product or commodity, credit or interest rate derivative, etc.) – issued under contract to a firm, facility, person, project or agency, public or private, in exchange for the delivery of positive environmental externalities that are real, verified and additional to business as usual, whereby such positive externalities result in the creation of transferable property rights recognised within international, regional, national and sub-national legal frameworks.” Also, according to Bloomberg “At least $30.7 trillion of funds is held in sustainable or green investments, up 34% from 2016, according to a report by the Global Sustainable Investment Alliance, a group of organizations tracking those moves in five regions from the U.S. to Australia. Overall, these money flows account for one-third of the tracked assets under management, and in some places have reached more than half.” Hence, recent expansion of these green/sustainable funds has created large pools of capital, with an appetite for shares of a sustainability oriented company, such as Beyond Meat.
For a little history and about us lesson on BYND, the company was founded in 2009 with the goal of producing plant based products that “look, cook, and taste” like meat. In their products, BYND uses processed pea proteins that combine flavorings to create tasty meat substitutes. Of all of their personal products, the Beyond Burger is by far the most successful. This meatless burger is already sold in chains Carl’s Jr. and TGI Fridays. The Beyond Burger is also sold in an estimated 15,000 grocery stores and counting in the United States. The unique pitch behind BYND, is that they aim to compete directly with the meat industry, rather than be deemed a niche company for vegetarians. I’ve provided a screenshot of the company’s Unique Approach to the Market, which was included in the IPO prospectus.
The “93% of Beyond Burger buyers over the 26-week period ended June 30, 2018 also purchased animal protein” certainly caught my eye. If true, I don’t doubt the results I just don’t know yet how the study was conducted yet, this definitely backs their claim up of not being “just for vegans and vegetarians” and opens up the potential to compete in an estimated annual $1.4 trillion global meat market. With that being said, BYND is already attracting heavy competition with rival Impossible Burger and food industry behemoth Tyson Foods.
Hence, I don’t think a $8.12 billion market cap is in anyway justifiable, but I would be weary to short BYND until at least one month after the lock-up end date of October 29, 2019. With regards to the world of Green Finance, large pools of money desire to invest directly into the meat susbisitiute buisness, due to the meat production industry considered to be a large source of pollution and animal cruelty. This should continue to put upward pressure on BYND’s stock price and be of considerable risk to any potential short-sellers for the time being.