Even management at Beyond Meat Inc. (BYND) apparently thinks shares selling for more than 70 times sales is a bit of a rich valuation.
Shares of the plant-based food producer fell around 10% before Thursday's opening bell after Beyond Meat announced it will sell 3.25 million shares at $160 each. That price represents an 18% discount to Wednesday's close and is well below the heights at which many retail investors were still pouring into the stock ahead of earnings as Beyond Meat's rapid run after its initial public offering (IPO) coaxed continued optimism.
Goldman Sachs (GS) , JPMorgan (JPM) and Credit Suisse (CS) are leading the offering of new shares, with Bank of America Merrill Lynch (BAC) and Jefferies (JEF) acting as book-running managers. William Blair and Raymond James are co-managing the offering, which will see the company sell 250,000 shares while another 3 million will be sold by current investors.
"The gross proceeds to Beyond Meat from the offering, before underwriting discounts and commissions and offering costs, are expected to be $40 million," the company stated. "Beyond Meat intends to use the net proceeds received by it from the offering to continue to increase its production and supply capabilities, to pay for marketing and promotional activities, and for general working capital purposes."
The offering is expected to close on or about Aug. 5.
Aside from aiding the business, the move will benefit a large insider base that owns nearly 40% of Beyond Meat shares, promoting a float reminiscent of Canadian marijuana company Tilray (TLRY) .
Insiders such as venture capital firm Kleiner Perkins, CFO Mark Nelson and CEO Ethan Brown can now reap the benefits from the stock's epic run, undercutting the latest close but coming in well above the initial IPO price of just $25 a share.
After Beyond Meat burned short sellers on its rapid climb to more than $200 a share, time will tell if a larger float can generate lower borrowing fees for shares sold short and reverse that recent trend.
Still, some analysts advise being cautious on declaring the company dead meat.
"We continue to see BYND as a beat-and-raise story, one for which -- at least in the near-term -- fundamental momentum may matter more than valuation," J.P. Morgan analyst Ken Goldman said earlier this week. "With short interest still hovering around 50% of the float at last measure (well above the group average of 6.8%), Nielsen data getting better every week recently, and 3Q likely to impress, we still view being negative on the stock as a risky proposition right now."