Amid sluggish industry sales and the declining price of competitor Beyond Meat (NASDAQ:BYND), Impossible Foods is re-evaluating its long-planned IPO. The plant-based meat company is now considering a potential sale within the next couple of years.
“It’s one option,” Impossible Foods CEO Peter McGuinness stated on Yahoo Finance’s Opening Bid podcast. “A sale could broaden Impossible’s reach and accelerate the achievement of our mission. It would also offer a chance for investors and employees to realize good returns on their equity.”
Exploring Alternatives
While McGuinness didn’t rule out a significant capital raise or an IPO, the possibility of a sale is a new avenue under consideration. The company’s last capital raise in November 2021 secured $500 million.
McGuinness acknowledged that Impossible Foods, founded in 2011 by Dr. Pat Brown, is yet to turn a profit despite multiple rounds of layoffs. These losses stem from a downturn in demand for plant-based meat and operational inefficiencies. Since taking the helm in 2022, McGuinness has focused on improving the company’s operations.
Impossible Foods currently has enough cash reserves to sustain its business operations, and no decision has been made regarding a sale, IPO, or capital raise. “We could discuss this in more depth, maybe a year or two from now. But for the time being, our focus is on strengthening our fundamentals, expanding distribution, raising awareness, and enhancing the quality of our food,” McGuinness added.
Learning from Beyond Meat’s IPO
Impossible Foods doesn’t need to look far to see the potential outcomes of an IPO. Rival Beyond Meat went public on May 5, 2019, with a highly successful initial public offering on the Nasdaq. The IPO was priced at $25 per share, opened for trading at $46, and closed at $65.75—a 163% gain.
Following its IPO, Beyond Meat secured significant deals with global restaurant chains like KFC and Dunkin’ Donuts, expanded into retail stores such as Target (NYSE:TGT), and increased its manufacturing capacity. By July 2019, Beyond Meat’s stock reached a peak of $234.90 per share.
However, the COVID-19 pandemic severely impacted the restaurant industry, leading consumers to shift back to less expensive meat-based options. This caused Beyond Meat’s momentum to stall, mirroring the challenges faced by Impossible Foods, which had been expanding into restaurants like Burger King and retail stores.
Industry Challenges
Both Beyond Meat and Impossible Foods have faced criticism regarding the healthiness of plant-based items from the meat industry and media, impacting their consumer perception. By November 2022, Beyond Meat had to lay off 19% of its workforce due to financial struggles. In January 2023, Impossible Foods also laid off about 20% of its workforce.
Retail plant-based food sales reached $8.1 billion in 2023, down from $8.2 billion in 2022, according to the Good Food Institute. Beyond Meat’s stock price is currently $6.97. McGuinness declined to disclose Impossible Foods’ current valuation but indicated it’s likely below the $7 billion it reached during its 2021 funding round.
“The category is not where it needs to be. So investors are exercising caution at the moment,” McGuinness said.
Future Prospects
As the plant-based meat industry navigates these challenges, Impossible Foods remains dedicated to improving its core operations and exploring strategic opportunities. Whether through a sale, capital raise, or IPO, the company aims to strengthen its position and achieve its mission.