The earnings beat wasn't enough to convince investors to stick with the meat substitutes company as the lockup on its shares expired
Beyond Meat Inc. announced its first quarterly profit, beat analyst expectations and raised its revenue outlook when it posted its third-quarter earnings Monday — a day later the stock is down more than 20 per cent.
The meat substitutes company doubled the Street’s expectations by reporting $US0.06 in earnings per share when only US$0.03 was expected. It also managed to generate US$92 million in the three months ending on Sept. 30 compared with the US$82 million analysts projected.
The earnings beat though wasn’t enough to convince investors to stick with Beyond Meat as the lockup on its shares expired Tuesday. The stock opened at US$82.96, trading below US$85 for the first time since its first month on the public markets.
When Beyond Meat went public in May, it did so with a constrained float; less than 20 per cent of the company’s shares were actually available to investors, meaning that demand was driven by low supply.
The tactic of launching on the market with a tight float, one that is frequently used by companies looking for immediate growth, initially worked for the El Segundo, Calif.-based company. Beyond Meat debuted at US$25 but closed its first day of trading at triple that. Soon, analysts were questioning its pace and warning that the stock was in danger of overheating, but investors continued to boost the stock. In early July, Beyond Meat’s growth reached a plateau at US$239.71. Since then, the stock has lost 65 per cent of its value.
In its infancy, Beyond Meat has already faced its fair share of challenges. Its monumental early gains were attributed to the fact that it offered public market investors their first chance to bet on the rise of plant-based meat. Some of that interest began to wane soon after as it appeared that Beyond Meat’s main rival in the space, Impossible Foods, had also been prepping for an IPO. Established companies like Nestle SA and Tyson Foods Inc. also moved into the space.
Due to its stellar rise, the company also became a favourite target of short sellers, who didn’t believe that that upward momentum could be sustained. On Monday, Beyond Meat was the most expensive U.S. stock to short, according to S3 Partners data, which attributed a hefty 92 per cent borrow fee to the company along with a total short interest of $560 million.
Before the sell-off, Beyond Meat offered a glimmer of hope to its investors, raising its full-year guidance to a range of US$265 million to US$275 million from US$240 million.
Copyright Postmedia Network Inc., 2019