Early investors in plant-based food purveyor Beyond Meat were set for large paydays as the company’s shares became freely tradable on Tuesday, promising a test for one of this year’s most divisive stock offerings.
Up to 80 per cent of the company’s shares became eligible for trading, giving venture capital firms such as Kleiner Perkins and Obvious Ventures the ability to cut their positions and return money to investors.
Fears of significant sales by early investors sent shares down more than 20 per cent in early Wall Street trading on Tuesday, despite the company announcing its first-ever quarterly profit late on Monday.
Many early investors are sitting on eye-watering gains. The company, valued at $1.3bn in private markets, rose to a market capitalisation of $12bn in July as investors bet its meat substitute products would steal business from traditional food producers.
KFC announced in August it would test “Beyond Fried Chicken” nuggets in partnership with Beyond Meat, the latest in a series of fast-food chains to try new meatless products with the company.
But some analysts and investors recently turned on Beyond Meat, sending its shares below $100 last week for the first time since June. The company has attracted the interest of short-sellers betting its shares will fall on Tuesday, when the lock-up period following its May initial public offering expired.
Beyond Meat’s slide has also drawn the attention of early investors anxious to cash out. Mark Yusko, chief executive of Morgan Creek Capital Management, said his fund’s initial investment in Beyond Meat had increased about 100 times and signalled he was preparing to sell.
“It’s going to go down 90 per cent and still be overvalued,” Mr Yusko said this month at the Sohn Investment Conference in San Francisco.
Mr Yusko did not respond to emails about his remarks, and Beyond Meat did not respond to a request for comment on the lock-up period’s expiration.
Among the investors being closely watched is Kleiner, which owned about 12.8 per cent of the company before its IPO. Kleiner has said its initial investments increased 80 times, based on the average closing price last week. One person close to the VC group’s decision-making said it was planning to sell shares.
Union Grove Venture Partners co-founder Gregory Bohlen said the group has made about 50 times its private investments in the company. Mr Bohlen, who serves on Beyond Meat’s board, said he has no influence over whether Union Grove sells any shares but hopes the firm will maintain its position.
“I’m a believer in the company, absolutely,” Mr Bohlen said. “Am I a believer in the stock? I don’t think you can separate the two.”
He added: “Just because 80 per cent of shares are in private hands doesn’t mean we all run to the market on Tuesday.”
The venture firm Obvious, which owned more than 9 per cent of the company before its IPO, declined to comment on its plans following the lock-up’s expiration.
Beyond Meat stock was the most expensive to borrow for shorting this week, according to data from S3 Partners, which said 43 per cent of the company’s available shares were out on loan.
The company earlier allowed some investors, including Kleiner and chief executive Ethan Brown, to sell upwards of 3m shares during a secondary transaction in July.
Additional reporting by Emiko Terazono in London