Beyond Meat’s refinancing efforts that spurred meme stock rally now have shares down 67%
Well, with a bit of time and a lot of volatility, the dust is settling on how Beyond Meat’s refinancing efforts have gone.
This morning, management announced that its new 2030 notes could be converted at a price of about $1.7459, or around 85% above where shares are trading in the premarket in the midst of another big retreat.
The twists and turns that brought us here:
On September 29, the company announced its intention to replace $1.15 billion in convertible notes due in 2027 (with an interest rate of 0%) with a mix of stock and up to $202.5 million in new second lien convertible notes due in 2030 (with an interest rate of 7%). Prior to that, its stock closed at $2.85.
Shortly after management reached a deal with 97% of its 2027 noteholders in mid-October, Beyond Meat became a meme stock. Despite massive dilution that raised the company’s share count by more than 300% and made prior noteholders the new corporate owners, retail traders positioned for a potential short squeeze in the shares, thinking the refinancing would give the company a new lease on life.
Shares rose from a closing low of $0.52 on October 16 to an intermediate closing peak of $3.62 on October 21 — a near 600% rally in just three sessions. That propelled shares to well above where they were trading before these refinancing plans were announced. But the true frenzied zenith for Beyond Meat came the next session, when the stock more than doubled intraday on what were then record volumes of above 2 billion, only to ultimately close slightly lower. The air came out of the balloon almost immediately thereafter.
(A fun aside: in calculating the conversion rate for the 2030 convertible notes, management deems that day to have been a “market disruption event,” which removes it from the calculations and makes the conversion price lower than it otherwise would have been.)
Shares tanked on October 23 on heavy volumes, and then interest and trading activity in Beyond continued to wane — along with its share price. Delaying the release of Q3 results as management tried to figure out how big of a write-down to take and then issuing those numbers along with a weak Q4 sales outlook did nothing to change the narrative.
There’s no reason to think those 2030 notes will be converted any time soon, based on where the stock is trading. Because these 2030 notes provide the opportunity for “payment in kind” and Beyond is in a relatively stressed financial position, interest on these notes can be paid not just with cash but also (more likely) through the issuance of more stock or the accumulation of more debt.
In sum: Beyond Meat eliminated about $800 million in debt and all it got in exchange was a 67% decline in its stock price, a longer runway to make processed peas into faux meat, and an entertaining (and for those who bought into the meme rally without exiting at the right time, painful) story.
