Beyond Meat set to slip below IPO price as soaring costs raise cash flow doubts

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(Reuters) – Beyond Meat shares fell 28% and were on course to open below their initial public offering price for the first time on Thursday, as investors worried about rising costs of the vegan meat manufacturer to fight against increased competition.

Cash used for operations in the first quarter jumped to $165 million, from about $31 million a year ago, as the plant-based meat pioneer diversified its product line and offered deeper discounts for protect its market share.

“Beyond Meat’s cost structure could be out of whack and cash could run out by the end of next year,” said JP Morgan’s Ken Goldman.

“We are concerned that management’s outlook may be somewhat out of step with current realities.”

On Wednesday, chief executive Ethan Brown sought to address the concerns.

“I wouldn’t take this quarter’s cash burn and then kind of play it and assume we’re cash-strapped based on that,” he said, adding that the company was taking “several steps to reduce expenses.

Beyond Meat’s shares were trading at $18.80 before the bell on Thursday, well below its 2019 IPO price of $25. Its market value dropped to $1.66 billion from a high of around $14 billion.

At least five brokerages cut their share price targets on Thursday, with some raising concerns about the company’s path to profitability, especially as they expect cost pressures to persist due of soaring inflation.

“Plant-based meat is not a fad, Beyond Meat’s mission is noble, … however, we remain of the view that an earnings inflection could take several quarters or even years,” analysts said. of Cowen.

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Sriraj Kalluvila)

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