Vegan IPO - Add meat to your portfolio.......not your plate!
Updated: Dec 14, 2020
Dear Investors, do any of you take cognizance when celebrities like Beyoncé and Brad Pitt speak about the benefits of a plant based diet, or simply put a Vegan diet?
Well, here at Stocks&Street, we purely look at all developments from a stocks point of view, short term or long, but purely the “what's the impact” on which stocks from all news under the sun.
How would you react if I told you that there is a segment where something almost magical in terms of its growth is happening right under your very noses and its is a 100% growth guaranteed, no shrinking here whatsoever, no even due to profit bookings and portfolio rebalancing.
Lets go over some very plain common knowledge that most of you know about already, there is a trend towards cruelty free food, won’t you say, oh yes, heard of this and I have sampled too at times.
Let me put another common knowledge on table now, there is a need to reduce the carbon foot print as per the Paris accord (and India has already met it's target and is on way to exceed it). Joe Biden, the president elect has already committed to deliver on the US pledges and share of the carbon reduction as per the Paris accord…..does it start to make sense, can you pull together the jigsaw?.....still not?
Ok, here is another piece of the jigsaw….. meat industry is one of the biggest culprit for greenhouse gases at 14.5% of the total, and the big carbon footprint that any nation has and it would be this industry from which the carbon cutting will be met……. Still in doubt?
Here it is, a bit more clear about the writing on the wall(street), let me translate this for you in business terms:
1) There is a clear demand for vegan food – as per research from GlobalData about 600% increase in the US alone (and 350% in the UK and Chinese government has asked their citizens of 1.38 billion to reduce their meat intake by 50% and China is not a democracy) , of those people who are now vegans, relative to that in 2017, a mere 3 year period – do you see the growth already?
2) The Paris accord is an international agreement, signed by 196 countries, including the US and is “Legally Binding” (and hence there will be apolitical will to see it through) – it was signed in December 2015 and was implemented world over in November 2016 – did we say there is a gigantic rise of 600% in vegan citizens (all former meat eaters, please if you questioned this, it will be embarrassing you own common sense) – sounds like co-incidence? Here is a push and pull effect (pull as the Vegan food industry is at best loosely regulated and at this point in time has only third party certifications from Non Profit organizations that give you the "right" to call your product vegan!, and ofcourse, celebrity endorsements help pull it too (very few have any personal axe to grind with Brad and Beyoncé!
Will talk about the regulation a little lower in the article, but sample these vegan nuggets of infographics first:
3) Here is an abridged list of Plant based vegan food companies and there could be a couple more by the time I have typed them in: Dr Martens, Natural Order Acquisition Corp., Pea Protein, Egg Alternatives, Laird, Eat Beyond, Beyond Meat, The very Good Food Company Inc, Ingredion Incorporated, AAK, SenzaGen, SIMRIS, Modern Meat, Else Nutrition, Total Prudence PLC, Archer Daniels Midland, Bunge Limited and quite a few Semi Vegan listed stock companies.
While quite a few from this abridged list above are already publicly listed and being traded, there are a handful others that are planning to soon list, via the IPO route. But generally the Vegan companies listing on bourses is a new trend, the pioneer shall be Beyond Meat of the vegan meat burger fame, it listed last year and how – well in words of Forbes, it had “one of the most successful IPOs in history”
Another case in point would be Natural Order Acquisition Corp.,, which was listed in Oct 2020 and raised about $230 M, and has a market value of about $288 M by deal size, so there is a possibility of further round of promoters equity dilution, which shall mean an IPO of common stock for common investors like us!
Back in summer this year, Ittleda international and Laird superfoods issued their respective IPO’s and the latter had an opening of 52.5% above the quoted price, so essentially a premium of more than 50% of its discovered valuations (via stock price discovery route by their IPO call auction facilitated by their partnering Investment Bank) - veritably indicating the huge appetite from the Investors for vegan stocks.
To continue further, there are many more which look poised to go public in the months to come. For example, Impossible foods obtained another round of funding to the tune of $200 M, which now pegs this one at a total funding of about $1.5 B - a clear indication that once the venture has matured and is ripe for a public listing the promoters are going to get it listed and harvest promoters pay-offs on the their parked equity. Which also means, we, the common investors can pick up a share in the growth story of this wonderful company!
Eat Just, another of the same segment, offering plant based alternatives to egg (I know some of us won’t even consider the humble egg as the same food category as meat!!), so its essentially a very plain business idea, wrapped and marketed so well that it has received $300 M in funding…………..I don’t need to explain any further, I am waiting for their IPO.
Enough talking about the supply side, lets talk a little from the demand side now.
I have already mentioned that there was a gigantic increase in vegans over just the last 3 years, now imagine the growth in crude numbers, when I say that about a quarter of the entire US population of 300 M and a similar quarter of UK population of 70 M are now vegans. This roughly a quarter of 400 m individuals worth of ready market, is just these two countries alone, I am not even talking about so many others on the globe that are going vegan as I type and you read, not to mention these vegan individuals have social connections (mother, father, children, wife, girlfriends, colleagues, friends, who all will definitely get influenced by their culinary habits and "try it once", before some of them see real health transformation and become vegans themselves, we are talking about a perpetually increasing demand here…..
Lets just stick to these quarter of 400 M strong vegans, now you do the math, these guys aren’t giving any orders for your favorite Double Jack Beef burger from Jack in the Box, they are ordering vegan meat burgers, this is called demand (which is shrinking for beef burgers and expanding for Vegan Burgers – as you know this expansion will reflect in the expansion of the Stock prices – that is if it is listed, and will also reflect as a shrinkage of the stock prices of those that supply beef burgers, since capital markets are a zero sum game as you already know!)
US and UK are both countries with robust supply chains for the food industry, we can easily measure this impact, but think about other countries, whose political bosses have also to meet the reduction target of their green house gas foot print and shall also put in motion very similar supply side ecosystems to cater to the impending increase in the demand for vegan foods in not a very distant future.
This is where we need to smart up and be on the look out of the next Vegan IPO, all I can say is Vegan is the new meat……on the plate and in your stock portfolio!