The stock of plant-based meat maker Beyond Meat (BYND -1.03%) surged out of the gate on its first day as a public company on Thursday, soaring as much as 150% (no, that's not a typo) in the minutes after it began trading on the Nasdaq exchange.
The shares, which were priced at $25, opened around 12:18 p.m. EDT at $46 and soared to over $60 in early trading. At current prices, this would value the company at roughly $3 billion.
The writing was on the wall
Beyond Meat initially planned to price its shares at between $19 and $21 per share, which would have valued the company as high as $1.2 billion. Earlier this week, the company filed an updated S-1 with the Securities and Exchange Commission (SEC), increasing its expectations to a range of $23 and $25 per share. The stock was eventually priced at the high end of its revised range at $25. This was a 25% increase from the midpoint of its original estimates -- though apparently not high enough.
Beyond Meat offered 9.625 million shares to the public, up from its original plans of 8.75 million, which valued the company at $1.5 billion. The company will bank just short of $241 million from the offering and plans to use the proceeds to beef up -- er, augment -- its manufacturing facilities, invest in additional research and development, and bolster its sales and marketing team.
Both the increased appetite for shares and the higher prices they fetched is a sign of the heavy demand from investment banks and other institutional investors, as well as from individual shareholders. Demand was much higher than the company anticipated, as evidenced by the more than doubling of the share price.
Faux burger shortage?
Demand for plant-based meat substitutes has been growing. Beyond Meat said in its regulatory filing that it's one of the fastest-growing food companies in the U.S. The faux-meat maker has partnered with a growing number of major food chains to offer its plant-based burgers and ground-meat substitute.
Earlier this year, Carl's Jr. introduced the Beyond Famous Star, a meatless take on one of its flagship burgers, at more than 1,000 locations. Chronic Tacos is also getting into the game, offering Beyond's ground-meat substitute on any of its tacos, burritos, salads, or nachos. In all, the company sells its plant-based protein to 30,000 retailers, restaurants, and schools in the U.S. and Canada.
Beyond Meat isn't the only company making headlines for offering meat alternatives. One of the company's biggest rivals, Impossible Foods, recently made a splash by landing a deal with Burger King to launch the Impossible Whopper at more than 7,000 locations by the end of the year. Impossible Foods notified its distributors of a temporary shortage of its meatless burgers, the result of the increasing interest.
This illustrates the strong demand for healthy alternatives to meat among the general population, which could bode well for Beyond Meat.
Should investors jump on the meat-substitute bandwagon?
It's important to remember that the early days of trading for a newly minted public company can be fraught with volatility, and how a stock trades on its first day shouldn't be taken as an indicator of the company's future potential.
Lyft, another recent IPO, provides a fine example of the volatility investors can expect. Shares of the ridesharing company ended their first day of trading up about 9%, but the stock has fallen nearly 26% since its debut.
For investors with an appetite for risk, Beyond Meat may be on the menu. The company is an early entrant into a fast-growing industry, but consumers are fickle. Beyond Meat has yet to make a profit and still has many hurdles ahead. If you buy in, be careful not to put too much on your plate.