What Happened?
Shares of plant-based protein company Beyond Meat (NASDAQ: BYND) jumped 1.9% in the afternoon session after the stock attempted a slight recovery following a sharp decline in previous sessions that was driven by its new debt restructuring plan.
The plan involved a debt swap, but it also included the issuance of up to 326 million new shares. This news concerned investors because the number of new shares was more than four times the existing amount, which would significantly dilute the value of current holdings. In response to the dilution fears, the stock had plunged almost 50%, falling well below $1 per share. The company's financial struggles were compounded by weak demand for its products, with net revenue down 15% in the first six months of the year.
After the initial pop the shares cooled down to $0.79, up 0.8% from previous close.
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What Is The Market Telling Us
Beyond Meat’s shares are extremely volatile and have had 54 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 21.8% on the news that the stock's negative momentum continued as the company announced a debt-swap deal that triggered fears of massive shareholder dilution.
The plant-based food company revealed that a large majority of its bondholders agreed to exchange convertible notes due in 2027. In return, Beyond Meat was set to issue new debt and over 326 million new shares of common stock. This move more than quadrupled the company's number of outstanding shares. While the deal aimed to reduce the company's overall debt and push back its payment deadlines, the significant increase in the number of shares meant the ownership stake of existing shareholders was heavily watered down, causing the stock's value to plummet.
Beyond Meat is down 79.4% since the beginning of the year, and at $0.79 per share, it is trading 88% below its 52-week high of $6.61 from October 2024. Investors who bought $1,000 worth of Beyond Meat’s shares 5 years ago would now be looking at an investment worth $4.28.
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