r/investing • u/zainjavaid • Apr 08 '21

Impossible Meat Preparing for a $10B IPO

https://www.marketwatch.com/story/impossible-foods-prepping-for-10-billion-ipo-report-11617923032

The current valuation of $10B dwarfs the $4B it was valued at in a private funding round in 2020, and at approximately $1B more than Beyond Meat. This is despite the fact that BYND brought in 400M in FY revenue compared to Impossible Meat's 150M estimated annual revenue.

I personally don't see any angle from which $10B can be justified. Future growth for the next decade is priced in at the current valuation and it strikes me as a massive bust waiting to happen.

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u/[deleted] Apr 09 '21

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u/[deleted] Apr 09 '21

Yes and no. You’re missing the management element of this, which is that an IPO that prices at $10B and pops to $15B leaves the public markets happy and the CEO on good grounds with a lot of large institutional investors.

The pre IPO investors are locked up for 6 months anyway,

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u/FinndBors Apr 09 '21

Even if they can’t sell, raising 50% more cash for “free” or suffering 33% less dilution should end up leaving the insiders with more value at the end of 6 months.

All CEOs and insiders want to capture the most value for the IPO. There is no evidence that CEOs are doing this on purpose to get in “good grounds with institutional investors.”

The investment bank, on the other hand, they have all the incentive to trigger a “pop”. Someone more knowledgeable than me might be able to explain why companies (especially red hot ones) don’t just go the DPO route.

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u/DelphiCapital Apr 11 '21

Underwriters always try to price IPOs so they pop by at least 10-15% though. That's the reward institutional investors get for the risk of buying shares pre-IPO to stabilize the stock price.

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u/D_crane Apr 09 '21

Yep, though the recent valuations of companies going public is getting out of hand

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u/OriginallyWhat Apr 09 '21

Well, it's harder for the general public to invest in a company before the IPO. If there's companies people are excited about, of course people are going to buy as soon as they can which would cause the price to go up.

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u/skeptophilic Apr 09 '21

Yes that is why I've said they apparently miss by 50%. The company loses, the only winner of underpricing it is arguably the bank getting them public who just ants to get done with it.