Beyond Meat insiders are cashing in on the stock’s 800% spike — and other investors don’t like it (BYND)

Reuters / Brendan McDermid

Beyond Meat announced a second public offering of 3.25 million shares Monday, shortly after releasing its second-quarter 2019 earnings.
Three million of those units are owned by current shareholders, including CEO Ethan Brown and other insiders.
The offering will enable them to cash in on the company’s roughly 800% surge since going public three months ago.
The announcement contributed to a sharp decline in Beyond’s stock price, which saw shares plunge as much as 17% on Tuesday.
Watch Beyond Meat trade live on Markets Insider.

Shortly after reporting second-quarter earnings Monday, Beyond Meat announced that it would be selling an additional 3.25 million shares in a secondary public offering — an amount that includes 3 million units owned by CEO Ethan Brown and other insiders.

The announcement came amid Beyond’s second-quarter earnings report on Monday afternoon, which showed the company lost more money than expected. The combined effect of the two developments sent Beyond shares plunging by as much as 17% on Tuesday.

The offering marks an opportunity for early investors to cash in on portion of the stakes they hold in the company, which had seen shares soar more than 800% since its initial public offering three months ago.

Brown himself will sell more than 39,000 shares in the offering, Bloomberg reported, while early investors from Kleiner Perkins and Obvious Ventures will have the option to offload as well.

It’s possible traders are selling because they view the mere prospect of insiders selling shares at first opportunity as a signal they believe the shares lack upside at current levels. That would jibe with what analysts have been saying about the company being overvalued. None of the nine that cover the stock currently have a rating higher than "neutral."

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Further, adding new shares to the marketplace lowers the value of outstanding shares on the market by increasing the amount of supply without necessarily boosting demand to match. The new offering is about 5% of the company’s outstanding shares, and includes 3 million shares from Beyond stockholders and an additional 250,000 from the company.

The company’s official statement on the announcement — delivered in a press release — is that it intends to use the net proceeds from the offering to continue to increase its production and supply capabilities, pay for marketing, and for general working capital purposes.

To be sure, analysts that cover the stock have been relatively unfazed by the additional offering and have focused on Beyond’s earnings release, which displayed improvement in financial fundamentals and raised the full year outlook for 2019.

"We continue to expect significant growth potential in the plant-based meat category and believe that Beyond Meat is well positioned as one of the front-runners leading the new wave of plant-based meat products," wrote a team of analysts led by Alexia Howard at Bernstein Research. The group raised its price target to $172 from $123 on the earnings release.

Analysts at JPMorgan also raised their estimates and price target to $188 for December 2020 from $121 for December 2019 following the earnings. Consumer Edge also boosted its price target for Beyond Meat to $131 from $91.

Shares of Beyond Meat are still up roughly 700% year-to-date.

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