Hot grill summer: Is Beyond Meat (BYND.Q) a Tilray (TLRY.Q) in the making?

Beyond meat
07/24/2019

Beyond Meat (BYND.Q), the vegan burger maker we all know and love, has partnered with Dunkin’ Brands’ Group (DNKN.Q) to add its plant-based sausages to Dunkin’ Donuts menus in Manhattan, but the plant-fed party may be coming to a close come October.

The Beyond Sausage Breakfast Sandwich is just BYND’s latest offering. Despite only going public in May of this year, the company has experienced a meteoric 200% increase in share price, leaving many investors wondering where the buck stops.

“In addition to offering a patty with 10 grams of plant-based protein, the new sandwich helps Dunkin’ deliver the better-for-the-planet environmental benefits of plant-based protein,” according to Dunkin Brands’ press release.

The above quote, with a few words bolded for emphasis, is one potential reason why Beyond Meat stock is hotter than the grill you overcooked them on that one time (don’t lie, we’ve all done it).

Impact investing is a big part of why BYND is so popular. As demographics shift and younger generations begin to make up more and more of the global investor base, simply being profitable isn’t enough.

From an earlier Guru offering:

Social Impact Capital, a VC firm specializing in ethical investing, compiled data on ethical investing and who it appeals to. Unsurprisingly, two standout demographics are millennials and women.

  • Women care greatly about impact investing. 76% of women say they want to invest in organizations promoting social well-being. 90% of inheriting women will become solely responsible for their wealth. Over 70% of women fire their financial advisors within one year of financial control.
  • Millennials care greatly about impact investing. 93% of millennials believe that a company’s social and environmental impact is key to their investing decisions; this number is up from 74% only two years ago. 67% of millennials agree that “My investment decisions are a way to express my social, political, or environmental values.” 61% of millennials feel lower returns on an investment in exchange for having a positive impact on society or the environment are acceptable. 71% would turn down the opportunity to make a significant sum of money if it required investing in a company with a negative impact on society or the environment. U.S. Trust, Insights on Wealth and Worth, 2016; 2014.

But, as the old proverb goes, this too shall pass. Nothing goes up forever, and Beyond Meat, at $11.7B in valuation, bless their hearts, is no exception.

Beyond free trading

In the company’s prospectus, the traditional 180-day lockup for IPO stock is described. What isn’t traditional is the company’s share count. Out of 60 million shares issued, the company only has a little over 11 million currently trading.

That means nearly 50 million shares are coming out of lockup in October. That’s right, soon the market will be awash with your precious plant patties and the paper behind them.

But in all seriousness, it was irresponsible to keep the share count of BYND so low. Once 85% of shares start trading, and we know what our good friends on Wall Street plan on doing as soon as they can, that share price is going south.

Beyond Meat, BYND, Unicorn Bay
Courtesy of unicornbay.com

It happened with Tilray (TLRY.Q) and if there’s a comparison to be made against Beyond Meat’s astounding upward share price, it would have to be within the cannabis sector. Where else can you see this kind of (some would say unearned) valuation?

Here’s a MarketWatch subhead from September 2018: “Marijuana producer’s stock was halted five times in less than an hour Wednesday, after rising more than 400% in a month.”

Max Cherney attributes this to three things: a low number of outstanding shares, significant short interest and not many investors than can loan the stock to short sellers.

According to unicornbay.com, Beyond Meat has a pretty low short interest ratio but it does have the relatively low share count Tilray did before the bulk of its shares became free trading. Volatility is to be expected.

Tilray shares were down 17% as its lockup period expired on Jan. 15, 2019.

But don’t fret, we’ve still got the whole summer to enjoy Beyond burgers, and upticks in BYND share price.  If you live in Manhattan, give those sandwiches a try and let us know what you think in the comments.

–Ethan Reyes

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