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Photography by Daniel Acker / Bloomberg
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The gains that
Beyond the meat
appreciated stock in his IPO is breathtaking. Shares jumped 163% on Thursday, the first day of Beyond Meat as a publicly traded company. What's more, equities jumped 43%, even from the initial level of $ 46 per share, which means investors who bought shares of Beyond Meat at the opening were very successful. The title made another jump of 7.8% Friday.
No matter how you look at the numbers, Beyond Meat's IPO (Symbol: BYND) has so far been a huge success.
The incredible gain of a day made us wonder if the market was ahead of itself. We wondered if the cost and availability of ingredients could pose a risk to the course of action. We concluded that the availability of vegetable protein was not a problem. After all, there is no sacrosanct relationship between the value of a Beyond Beef burger and a pea plant.
But there is another risk: Beyond Meat relies on co-manufacturers and related disputes with former manufacturing partners.
Beyond Meat states in its documents that it has no written contract with co-manufacturers CLW Foods and FLP Foods. Both companies are private companies and both are beef processors. Co-manufacturers seem to be the ones who take pea protein and turn it into meat-like products.
We can not say how risky it is to enter into a negotiating agreement with the manufacturers of the product. The United States Department of Agriculture lists about 80 US plants licensed to slaughter animals. Of course, Beyond Meat manufactures vegan products, but with FLP on the list, the USDA report represents a pool of alternative transformers for Beyond Meat.
CLW declined to comment and FLP did not answer questions regarding its relationship with Beyond Meat.
Beyond Meat also has problems with another former partner, Don Lee Farms, which is part of the private company Goodman Food Products. Don Lee sues Beyond Meat for unfair dismissal and theft of trade secrets.
Beyond Meat and Don Lee also did not respond to calls for comment.
The complaint explains that Beyond Meat does not manufacture its own products. Instead, Beyond Meat ships its pea protein to a co-manufacturer who processes and packages the finished products for distribution and sale.
Beyond Meat and Don Lee started working together in 2014. The relationship ended in 2017 and, apparently, Don Lee is not happy with the way it ended. Don Lee alleges that Beyond Meat left trade secrets in violation of a confidentiality agreement that was signed at the signing of the contract.
It's a fascinating story, but it's impossible to quantify or neutralize the impact at this stage. All companies have risks and new stocks have the added risk of increased stock market volatility. At least, investors can ask management co-manufacturing agreements and conflicts more regularly now that Beyond Meat is a public company.
The gigantic gain from beyond Meat on Thursday is the best jump in the first day of 2019 for the US IPOs.
Medical Silk Road
(SILK),
Shockwave Medical
(SWAV)
Zoom Video Communications
(ZM) and
Therapeutic turn
(TPTX) complete the other five winners of the first day. Three of these five people are also the best performers on IPOs this year, measured from their opening trades: Shockwave, Beyond Meat and Turning Point. Pinterest (PINS) and Pagerduty (PD) are the other two top five companies. These two stocks grew about 25% from their original positions.
Write to Al Root at [email protected]
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