Dive Brief:
- Beyond Meat was sued by investors last week who claimed the publicly traded plant-based meat company misled them about its manufacturing capacity and growth outlook.
- The Retail Wholesale Department Store Union Local 338 Retirement Fund filed the securities class action lawsuit. They argued the company as a whole and CEO Ethan Brown; former CFO, Treasurer and COO Mark Nelson; and former CFO Phillip Hardin — individually named in the litigation — “made materially false and misleading statements and omissions, and engaged in a scheme to deceive the market. These misleading statements and omissions artificially inflated the price of Beyond Meat stock and operated as a fraud or deceit” on investors.
- Beyond Meat has seen great peaks and low valleys since its IPO in May 2019. The company debuted on the stock market at $25. It peaked at $234.90 at the end of July 2019, and was trading at $10.68 early Monday afternoon. Beyond Meat did not respond to requests for comment on the litigation by press time.
Dive Insight:
Beyond Meat was one of the hottest stocks of the year when it made its market entry in 2019. In just a few months, the company surged to a share price more than nine times higher than its IPO price.
After a series of ups and downs, the company’s shares started to trend downward starting in mid-2021, the same time retail consumption of plant-based meat began to recede.
The class action lawsuit covers investors who had holdings in the company between May 5, 2020 — when the share price was $100.50 — and Oct. 12, 2022 — when it was $14.11.
The lawsuit says Beyond Meat had been boasting about success with product tests with prominent QSRs, including McDonald’s, Starbucks, KFC, Pizza Hut and Taco Bell. The company also assured investors and partners that it would “ensure manufacturability” through “extensive testing” and could produce its products at a commercial scale. Any delays toward reaching QSR partnership goals, the lawsuit said, were blamed on the changed consumer patterns during the early days of the COVID-19 pandemic.
But, the lawsuit continues, “the truth began to emerge” on Oct. 22, 2021, when the company reduced its net revenue outlook by up to $34 million, or 25%. The company also said its expenses and inventories were rising. When Beyond Meat reported its quarterly earnings weeks later, other details about sales decreases and unsold inventory were shared. Its stock price fell nearly 20%.
A week later, Bloomberg published an article that looked at internal production execution challenges, specifically when it came to the relaunch of Beyond Chicken. The article pushed the share price down further, the lawsuit claims. Reporting in December 2021 about the cancelation of a plant-based carne asada test at Taco Bell also led to further declines in the company’s stock, the lawsuit claims.
And, the lawsuit states, last October’s elimination of 200 jobs — including three executives either losing their jobs or choosing to step down — put further pressure on its shares.
The lawsuit also points out that Nelson, who retired from Beyond Meat in May 2021, but had a contract to serve as a consultant until this month, sold 440,000 shares of the company’s stock during the time period and made more than $58.3 million in proceeds.
The litigation does not state how large the retirement fund’s stake was in Beyond Meat, or whether it still owns shares. The lawsuit asks the court to determine adequate damages for their losses.
In its most recent earnings report last week, Brown told analysts Beyond Meat is “turning a corner,” with less operating losses during the quarter — though it also sold fewer products. The company also announced an equity offering program for up to $200 million.
