Beyond Meat stock butchered after end of share no-sale period

With many investors free to offload holdings, even an upbeat earnings report could not stop vegan burger maker's dive.

    McDonald's is testing 'PLT' (plant, lettuce and tomato) burgers with Beyond Meat's plant-based patties at 28 restaurant locations in Canada [Moe Doiron/Reuters]
    McDonald's is testing 'PLT' (plant, lettuce and tomato) burgers with Beyond Meat's plant-based patties at 28 restaurant locations in Canada [Moe Doiron/Reuters]

    Shares of Beyond Meat Inc sank about 20 percent on Tuesday, as a lock-up period for its early backers ended - freeing them up to cash in on this year's doubling in its share price.

    Earnings results published on Monday pointed to growing costs at the hugely popular plant-based "meat" producer.

    A surge in interest in vegan burgers, sausages and other meat lookalikes this year had spurred a spike in value of the Los Angeles-based company since its stock market launch in May.

    It was unclear whether any of the company's early investors were among those selling in early deals, but analysts said that expectations about them cashing in were likely to weigh on the stock in the short run.

    "Approximately three-quarters of the shares come unlocked today, as many observers of Beyond Meat are aware," said JPMorgan analyst Ken Goldman, adding that many shareholders might be "willing to sell with the stock down well over 50 percent from its high".

    "Either way, putting the lock-up expiry in the past ultimately should incent some investors to start buying the stock again, though the shares could fade lower beforehand," Goldman wrote.

    At a July peak, Beyond Meat shares had risen fivefold in value from their debut price of $46, but they have since retreated and closed at $105.41 on Monday, valuing the company at $6.38bn.

    'Biggest downside risk'

    The shares fell 16 percent to $88.50 in trading before the bell on Tuesday, making it the biggest loser among Nasdaq-listed companies. By mid-morning, the price was down to around $85 per share.

    The vegan burger maker's quarterly numbers, published after the market closed on Monday, showed its first-ever profit and raised its full-year sales forecast, but also said it would need to offer more discounts as competition heats up for a product that is marketed as better for human health and the environment than meat is.

    Bernstein analyst Alexia Howard raised doubts on whether the company could scale to a national level its partnership with McDonald's Corp - the world's largest burger chain, which is testing Beyond Meat's vegan burger in Canada.

    At least three Wall Street analysts cut their price target on the stock after the results, with JPMorgan's Goldman reducing his target to $138 from $189.

    The end of the 180-day lock-up period - allowing employees, insiders and other early backers to sell - has been well-advertised. But it also will contribute further to the pool of Beyond Meat shares available after the unusual and unexpected secondary offering of shares by the company in July.

    "Heightened competition from new entries to the plant-based category represents the biggest downside risk to our [price target]," Credit Suisse analyst Robert Moskow wrote in a note.

    "We believe that that increased liquidity ... will put the shares into a lower valuation range."

    Of the 12 analysts who cover Beyond Meat, eight rate it "hold", two "sell" and only two now suggest buying its shares.

    SOURCE: Reuters news agency