With stagnant industry sales and the stock price of competitor Beyond Meat (NASDAQ:BYND) plummeting, Impossible Foods is reconsidering its long-discussed IPO. Instead, the plant-based meat company may be leaning towards a sale within a couple of years.
“It’s one option,” said Impossible Foods CEO Peter McGuinness on Yahoo Finance’s Opening Bid podcast. “A sale could get Impossible in more places and achieve the mission faster. Investors and employees could see good returns on their equity.”
Considering Alternatives
While McGuinness didn’t rule out a sizable capital raise or an IPO, the possibility of a sale is a new consideration for the plant-based meat maker. The company’s last capital raise in November 2021 amounted to $500 million.
McGuinness admitted that Impossible Foods, founded in 2011 by Dr. Pat Brown, is not yet profitable despite several rounds of layoffs. The losses are due to declining demand for plant-based meat and operational inefficiencies. Since joining the company in 2022, McGuinness has been focused on improving its operations.
Impossible Foods has sufficient cash on hand to continue its business operations, and no decision on a sale, IPO, or capital raise has been finalized. “We could talk about it, you know, in a year or two from now in more detail. But right now, it’s about doing the fundamentals better, getting distribution, building awareness, and making the food better,” McGuinness added.
Lessons from Beyond Meat’s IPO
Impossible Foods doesn’t need to look far to see the potential outcomes of an IPO. Rival Beyond Meat went public on May 5, 2019, with a highly successful initial public offering on the Nasdaq. The IPO was priced at $25 per share, opened for trading at $46, and surged to $65.75 by the close—a 163% gain.
Following its IPO, Beyond Meat secured significant deals with global restaurant chains like KFC and Dunkin’ Donuts, expanded into retail stores such as Target (NYSE:TGT), and increased manufacturing capacity. By July 2019, Beyond Meat’s stock peaked at $234.90 per share.
However, the COVID-19 pandemic hit the restaurant industry hard, causing consumers to revert to cheaper meat-based items. Beyond Meat’s momentum stalled, much like Impossible Foods’, which had been expanding into restaurants like Burger King and retail stores.
Industry Challenges
Beyond Meat and Impossible Foods have faced attacks on the healthiness of plant-based items from the meat industry and media, impacting their consumer standing. By November 2022, Beyond Meat had to lay off 19% of its workforce due to financial struggles. In January 2023, Impossible Foods laid off about 20% of its workforce.
Retail plant-based food sales reached $8.1 billion in 2023, down from $8.2 billion in 2022, according to the Good Food Institute. Beyond Meat’s stock price is currently $6.97. McGuinness didn’t disclose Impossible Foods’ current valuation but indicated it’s likely below the $7 billion it reached during its 2021 funding round.
“The category is not where it needs to be. So investors are kind of cautious right now,” McGuinness said.
Future Prospects
As the plant-based meat industry navigates these challenges, Impossible Foods remains focused on improving its fundamentals and exploring strategic options. Whether through a sale, capital raise, or IPO, the company aims to strengthen its position and achieve its mission.
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