Beyond Meat burger packages displayed in a grocery outlet in Dobbs Ferry, New York.
(Bloomberg) — Shares of Beyond Meat Inc. saw a significant drop, plummeting the most since the 2019 IPO after the company announced that nearly all creditors had agreed to a debt restructuring, which will substantially dilute shareholder equity.
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The company’s stock plummeted over 48% on Monday, marking its largest drop ever. It had already seen a 47% decline in value for the year leading up to last Friday.
According to recent disclosures, the company expects to issue 316 million additional shares. This plan, revealed in September, has contributed to the stock drop and aims to alleviate the burden of debt. Should all noteholders convert, they would collectively hold 88% of the shares, based on previous reports.
While this debt restructuring could provide some necessary relief by lowering leverage and extending the debt maturity, the dilution of share ownership is said to be “quite significant,” according to Jennifer Bartashus from Bloomberg Intelligence.
Beyond Meat initially soared after its IPO six years ago, reaching a valuation exceeding $14 billion. Fast-food chains like McDonald’s and KFC explored plant-based menu options to attract consumers aiming to reduce meat consumption.
The pandemic initially helped boost the stock, as more consumers shifted towards healthier, meat-free alternatives. However, interest has since waned due to several factors, including high prices, processing concerns, and taste issues. A number of competing companies in the plant-based protein sector are facing shutdowns or layoffs as demand dwindles. Beyond Meat’s market capitalization now stands at just below $80 million.
Financial analysts on Wall Street remain largely pessimistic about Beyond Meat’s prospects. No buy ratings exist for the stock; rather, there are five hold ratings and six sell recommendations according to Bloomberg data.
The company is experiencing declining demand for meat alternatives in the US, its primary market. Sales dropped around 20% last quarter, amounting to $75 million, and year-to-date share prices have fallen over 70%.
As the market for plant-based proteins shrinks, “there’s little to invigorate excitement about the company’s growth potential that might counterbalance the adverse effects of the dilution,” Bartashus noted.
–With contributions from Charles Gorrivan.
(This article has been updated with closing price information; a previous update corrected an inaccurate calculation in the sixth paragraph)
