- Beyond Meat's lockup period expired Tuesday, and the subsequent sell-off serves as the latest reminder that technical factors can overshadow promising performance.
- Lockup periods keep pre-IPO insiders from selling shares usually for months after a company's public offering.
- The plant-based-meat company beat third-quarter expectations Monday afternoon, but early investors' profit-taking dwarfed the positive report.
- Beyond Meat's stock closed at more than 320% its IPO price Monday, making a strong case for early shareholders to sell as soon as they could.
- Watch Beyond Meat trade live here.
A sell-off fueled by the culmination of Beyond Meat's lockup period serves as the latest reminder that technical forces can overshadow strong company performance.
Lockup periods keep pre-IPO insiders from selling shares usually for months after a public offering. More than 75% of Beyond Meat's shares outstanding weren't tradable until Tuesday, establishing the period's expiration as a date-to-watch for analysts, investors, and company officials.
The plant-based-food company also issued an optimistic third-quarter earnings report Monday afternoon, beating Wall Street's profit expectations and raising guidance for full-year revenue. CEO Ethan Brown forecasted continued collaboration with McDonald's, praised new C-suite hires, and assured investors that grocery sales were not threatened by new competition in the meatless-meat sector.
Yet Beyond Meat lost nearly 25% of its market value once markets opened Tuesday as the company's lockup expiration brought new downward pressures to the share price.
"Despite coming off its highs, valuations still look remarkably steep and now will be seen by many pre-IPO investors as the time to cash out," Markets.com chief analyst Neil Wilson said.
The stock closed Monday afternoon more than 320% higher than its IPO price. Whether early buyers wanted to lock in their profits or were spooked by the pre-market sell-off, the earnings report's positive news was dwarfed by immense profit-taking.
The sell-0ff wasn't a complete surprise for Beyond Meat's leadership. The lockup expiration may worry long-term investors, but it's a necessary process for many young companies, executive chairman Seth Goldman said in a call with analysts.
"While we recognize short-term reactions to these milestones are often marked by heightened uncertainty, we believe that Beyond Meat is in a stronger position today than at any other time in its history," Goldman said. "We sincerely thank our pre-IPO investors for getting us to this point and for their long-term commitment and belief in our company."
Other examples of post-lockup wreckage
Beyond Meat is only the latest company to face this technical-factor tumble. Shares of Pinterest fell as much as 5.1% when its lockup period expired on October 15. Zoom Video fell as much as 4% when its lockup ended the same day. Both companies pared their losses for the day by market close.
Uber's lockup expiration arrives November 6, two days after it reports its third-quarter figures. The rideshare company's stock sits about 28% below its IPO price, and it remains to be seen how many early investors will want to realize their losses and sell shares when the lockup ends.
Beyond Meat traded at $85.56 per share at 12:05 p.m. ET, up about 31% year-to-date.
The company has two "buy" ratings, eight "hold" ratings, and three "sell" ratings from analysts, with a consensus price target of $114.82, according to Bloomberg data.
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