Beyond Meat IPO Launch – May 2nd, 2019

Beyond Meat, a corporation selling plant-based meat alternatives—such as burgers and sausages, launched their initial public offering (IPO) on May 2nd, 2019 in the Nasdaq stock exchange, under the symbol BYND. Beyond Meat, Inc. is the first pure-play maker of vegan “meat” to go public, generating over $240 million by selling 9.6 million shares at $25, raising the company value to $1.5 billion and doubling the worth of their shares to $57. These results are indicative of the massive jump in sales for plant-based meats—a 42% increase between March 2016 and March 2019 in the U.S. alone—totaling $888 million. Even Microsoft co-founder Bill Gates and celebrity actor Leonardo DiCaprio saw the value of investing in Beyond Meat, along with 30,000 grocery stores nationwide that carry their cholesterol-free meat alternatives. This growing trend is symbolic of the public’s growing awareness and interest in foods that are healthier, ethically sound, and better for the environment.

Now, before you jump on the band-wagon and purchase a ton of shares, let’s look into what an IPO actually is and why a successful IPO launch is not always a good indication that you’ll have investment success.

What is an IPO?

An Initial Public Offering (IPO, also known as stock market launch) is when a corporation sells stock to the public for the first time. IPOs generally involve one or more investment banks as underwriters. The corporation issuing its shares and offering them for sale on a public exchange enters a contract with a lead underwriter to sell its shares. The underwriter then approaches investors with offers to sell these shares.

The advantages of an IPO include:

• Increasing the value of the shares issued by the corporation.
• Lower-cost access to capital.
• Raising public exposure, prestige, and image.
• Makes acquisitions easier.
• Opens the door to various financing possibilities: equity, convertible debt, lower-interest bank loans, etc.

The disadvantages of an IPO include:

• Large marketing, accounting, and legal expenses.
• You have to disclose all financial and business information, typically in a corporate kit.
• Requires a lot of time and effort to manage.
• It’s risky; funding might not be raised.
• Disclosing all business info may be useful to competitors.
• Risking litigation from shareholder disputes and claims.

An IPO can be a risky ordeal for a corporation. Since the Beyond Meat IPO launch was so successful, it’s surprising that Beyond Meat has never made an annual profit and just last year took a loss of $30 million. Many investors still want to give the Beyond Meat IPO launch a go, seeing how they sold $33 million in 2017, to selling $88 million in 2018. This rapid growth and a successful Beyond Meat IPO launch may have you wanting to jump in and get a piece of the pie but let’s keep in mind what happened to a corporation called Rocket Fuel, Inc. (for example), which had similar success—going from $29 to $71 per share soon after their IPO, plummeting to $15 per share within a year. What happened? Disputes and litigation from shareholders that claimed the company violated Federal Securities laws by misstating and failing to disclose to investors material risks associated with the company’s business.

The Takeaway

There are lessons to be learned here, one being that an investor can’t inquire or demand enough transparency from a company before investing, even in the case of a successful IPO and a history of recent and rapid growth. And for entrepreneurs who want to raise capital by issuing equity through an IPO, it’s to their advantage to retain attorneys who understand the entrepreneur’s business and the risks surrounding the industry. These attorneys are better positioned to bring the entrepreneur in compliance with the disclosure requirements of Federal laws. Also, there may be ways to structure these offerings that avoid disclosure requirements.

Spiegel & Utrera, P.A. has over 175 years and 260,000 clients of experience to help you make money for your business and launch a successful IPO, incorporate a business, provide you with custom corporate kits, and complete iron-clad contracts or agreements with your best interest in mind. Call us today for a free consultation at (800) 603-3900.