Impossible Foods isn’t going public any time soon.
Instead, the company that wants to revolutionize food is continuing to take big checks from celebrities and venture funds. Impossible Foods has already banked $1.5 billion.
Bill Gates, Jay-Z, Katy Perry, Serena Williams, Jaden Smith and Trevor Noah have all chosen to invest in Impossible Foods stock. So have Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Khosla Ventures, UBS Group (NYSE:UBS) and Viking Global Investors.
Should you?
The Richest Get Richer
Based on the stock market success of Beyond Foods (NASDAQ:BYND), Impossible’s main rival, we’re missing out on something special.
BYND stock opened Sept. 4 with a market capitalization of $7.6 billion, on just $210 million in sales for the first half of 2020. Beyond Meat has lost about $8.4 million so far this year, but it has $222 million in the bank.
If anything, Impossible Foods may be worth an even higher multiple. The company’s retail partners include Walmart (NYSE:WMT), Kroger (NYSE:KR) and Target (NYSE:TGT). Its sandwiches are available at Restaurant Brands’ (NYSE:QSR) Burger King and at Starbucks (NASDAQ:SBUX). It recently added an executive from Gap (NYSE:GPS) to its board.
CEO Patrick Brown insists he’s an idealist. He talks about the environmental benefit of replacing meat in the food system. But his idealism doesn’t extend to spreading the wealth he is generating.
The Real Problem
The refusal of Impossible Foods to IPO is yet another example of how the public market has ceased to be a way to generate wealth and is now just a way to cash out.
While we like to think of investors as being of one class, that’s no longer true. Those who can get in on private equity deals represent a different class of people than those who only invest in public markets. They see less information, but they also see more opportunity.
Many of the biggest companies of the last decade squeezed all their valuation out before going public. Uber (NYSE:UBER) didn’t go public until its venture investors faced a “down round,” raising capital at a lower valuation than previously. The stock still trades below its IPO price of $35 per share. WeWork wound up being exposed as junk before its IPO.
Impossible Food’s latest funding round gave it a valuation of $4.03 billion in August. A round earlier in the year was at $3.61 billion. The most recent price per share is $16.15. Beyond Meat opened for trade this morning at $130.
I’ve personally tried both Impossible and Beyond Meat burgers. When cooked medium-well, there’s almost no difference. The main trick in both is getting the texture right, a little less coarse than ground hamburger. Impossible Meat’s innovation is soy leghemoglobin, which does the job of heme in making meat juicy and pink. Impossible Foods extracts its additive from yeast.
The Next Stage
While fake meat makes good burger patties, there remains the problem of muscle texture. There’s no Impossible Steak, and Beyond Meat’s chicken product is still the equivalent of ground meat. Scaling may solve the other big problem for plant-based meat, which is cost. Meat from cows still costs less.
CEO Patrick Brown has talked about structured meat as a goal but hasn’t announced any.
My guess is the company won’t go public until it solves the problem.
Should You Invest in Impossible Foods Stock?
Until there is an S-1 filing with the U.S. Securities and Exchange Commission, investors will have to content themselves with Kardashian-like arguments over process. An example is a recent letter from Lightlife attacking Impossible Foods for how many ingredients it has. The company calls the claims false but it doesn’t matter.
The market for plant-based meat is expected to grow at 18% per year for the next five years, to $12 billion by 2025. That’s still a tiny fraction of the actual meat market, which is $2 trillion.
In other words, there’s a runway for plant-based meat. You just can’t get on it.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks
