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Fake meat and cool coins

Popular stock: the share price for Beyond Meat Inc has climbed from $25 to $154 in less than two months, but is its market capitalisation of about $10 billion a fair reflection of the business? Nathan Kowalski takes a closer look (Photograph by Daniel Acker/Bloomberg)

A couple musings and ramblings for today on some recent market subjects.

Fake meat

Is fake meat the newest bubble?

Peridot Capital recently ran through a thought exercise in its excellent blog so we will run a similar thought exercise for consideration. Beyond Meat (“BYND”) in May went public at $25 per share and is now sitting at $154 per share. Returns over 500 per cent are things dreams are made of, but this seems fundamentally unhinged to me. The company now sports a market cap of about $10 billion.

Let’s consider this in the broader scope of the food industry. Kellogg (which owns vegetarian offerings through Morningstar Farms) and Conagra (which owns Gardein) have market caps of roughly $19 billion and $14 billion respectively. They also sport trailing 12-month revenues of $13.6 billion and $8.9 billion respectively versus BYND’s revenue of $115 million.

But maybe BYND is highly profitable? BYND has a 23 per cent gross margin v 29 per cent for Conagra and 34 per cent for Kellogg. Maybe we need to look at the growth and potential for BYND? Aswath Damodaran posted an excellent blog where he considers various scenarios for BYND and offers a valuation perspective given certain assumptions. In his assessment, he uses a market size of $12 billion by 2028 — at the upper end of forecasts for the vegetarian and/or vegan market. Let’s assume this gets split by ten competitors evenly (between the current meat providers, packaged goods companies and new vegetarian start ups this may be low?) we get $1.2 billion for BYND. At an industry enterprise value to sales of roughly 2.5 times BYND would be worth $3 billion or roughly $50 per share. Of course the market could grow to be much larger than this, and people may pay much higher multiples for vegetarian stocks or healthy stocks in general than current multiples would suggest but you get the idea. The risk/reward here seems heavily skewed towards risk.

Cool coins

A few things to note on Facebook’s new proposed payment coin Libra.

1, In my opinion, it is not really a cryptocurrency. It is actually more like special drawing rights as it is essentially a stable coin backed by a basket of fiat currencies. Will this become a new world reserve currency?

2, Facebook’s main target appears to be the developing world and the 1.7 billion (31 per cent of the global population) that don’t have bank accounts. Interesting note, 85 per cent of the world’s global transactions are still using cash.

3, There is no other company in the world that has a network the size of Facebook, so this could be a colossal opportunity. Facebook’s digital wallet, Calibra, potentially opens a venue to not only facilitate various forms of payment but maybe even traditional banking products like lending or investing.

4, This may, ironically, devalue many other coin offerings as this appears to be trying to do everything that multiple types of coins are trying to do. It hopes to lower global transfer charges and facilitate fast payments all in an ecosystem that offers stability and security. What is the purpose of bitcoin again?

5, I am not sure how this helps Bermuda as many people have suggested or inferred? Only companies that set up and operate here with actual bodies will add the most value. Facebook is basing this in Switzerland.

6, There is a great deal of controversy surrounding Facebook these days, so a newfangled and revolutionary product is not likely to escape the purview of politicians and regulatory bodies. I suspect the biggest risk to a successful launch will be some form of regulatory constraint or political disapproval.

China is way ahead on this already. The country has 583 million users of mobile payments or 71.4 per cent of internet users. When I was in China paying with cash was an oddity. The use of QQ coin, created by Tencent in 2002, is eerily familiar to Libra with a few differences.

To be honest, the most effective coin or digital currency will be the one used the most globally — could this be Libra? Do we really need another one after this?

Full disclosure: The author and clients of Anchor Investment Management own positions in Facebook. Not to be considered investment advice.


• “While Publicly Traded Plant-Based Meat Alternative Companies Are New, The Products Are Not” by Chad Brand, The Peridot Capitalist, Peridot Capital Management LLC https://tinyurl.com/yy99ggw6

• “Meatless Future or Vegan Delusions? The Beyond Meat Valuation” Musing on Market by Aswath Damodaran https://tinyurl.com/y69ln6h7

• Libra Website: https://libra.org/en-US/

• “Is the Libra digital coin just Facebook’s version of Tencent’s QQ coin?” by Xinmei Shen, abacus https://tinyurl.com/yxn8247d

Nathan Kowalski CPA, CA, CFA, CIM, FCSI is the chief financial officer of Anchor Investment Management Ltd. and can be contacted at nkowalski@anchor.bm. Disclaimer: The sole responsibility for the content of this article, lies with the author. It does not necessarily reflect the opinion, policy or position of Anchor Investment Management Ltd. The content of this article is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy or for any other purpose. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by the author to be reliable. They are not necessarily all-inclusive, are not guaranteed as to accuracy and are current only at the time written. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. Readers should consult their professional financial advisers prior to any investment decision. The author may own securities discussed in this article. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. The author respects the intellectual property rights of others. Trademark or copyright claims should be directed to the author by e-mail