Beyond Belief: IPO Hype Heats Up

The stupidest thing happening in the stock market right now isn’t the trade war fiasco — it’s the fake meat craze.

Plant-based protein purveyor Beyond Meat Inc. (NASDAQ: BYND) captured Wall Street’s imagination after printing a gain of more than 160% on its opening day late last week. The momentum continued through yesterday afternoon, with shares rising as high as $85 before finally encountering some selling pressure late in the afternoon. When the dust cleared, BYND finished the day down almost 9%.

Beyond Meat’s fairy tale debut might end soon enough. But don’t shed a tear just yet. Even factoring in yesterday’s drop, the stock is still barely cutting into Monday’s gains.

The frothy vibes are even starting to spread to companies hopping on Beyond’s faux-meat bandwagon. Hooters parent company Chanticleer Holdings Inc. (NASDAQ:BURG) just announced a partnership with Beyond Meat yesterday, Bloomberg reports, agreeing to serve Beyond products at more than 50 locations.

Chanticleer shares nearly doubled immediately following the announcement. After a wild afternoon, the stock finished the day up 27%.

BURG

Tech has officially come for our food — and investors are brawling to get a piece of the latest companies to jump on the bandwagon.

As veggie burger mania spreads, the IPO hype machine marches on to the next big name.

Ride hailing mainstay Uber Technologies is set to debut on the Nasdaq just a few weeks after competitor Lyft Inc. (NASDAQ:LYFT) was chopped to bits after its debut.

Once Uber officially goes public tomorrow, CB Insights notes that 2019 will become the biggest year for US tech IPOs ever measured by exit value. That’s because Uber’s $80 billion-plus valuation will be the third-biggest deal of all time, Dealogic notes, behind only Alibaba and Facebook.

But if you’re itching to compare today’s environment with the ‘90s tech bubble, keep in mind unicorns like Uber stayed private until they were much more established than many of the wildcard startups hitting the market 20 years ago. Thanks to the deep pockets of venture capital, there’s little need to endure the expense and scrutiny of the public markets these days until it’s time to sell out and bro down.

Despite the Lyft fiasco, there’s still plenty of hysteria left over for Uber. CNBC even felt the need to ask Uncle Warren about the impending Uber offering. Spoiler alert: He’s just not that into it.

“In 54 years, I don’t think Berkshire has ever bought a new issue,” Buffett said on Monday. “The idea of saying the best place in the world I could put my money is something where all the selling incentives are there, commissions are higher, the animal spirits are rising, that that’s going to better than 1,000 other things I could buy where there is no similar enthusiasm … just doesn’t make any sense.”

You’re telling me Warren Buffett isn’t interested in an overpriced IPO?

Shocking!

Unfortunately, I couldn’t dig up a soundbite of Buffett trashing Lyft’s first-quarter earnings.

As anticipation for Uber’s shining moment grows, Lyft shares are reeling despite beating analyst expectations.

The main sticking point was the fact that Lyft stopped reporting gross bookings data, “which complicates the ability of investors to understand pricing trends,” one analyst explained to Business Insider. Nothing says “trust me, business is going well” like keeping key metrics from your investors.

As punishment, sellers pushed Lyft stock to new lows. Shares fell more than 10% yesterday. Lyft is now down more than 40% from its opening day highs.

LYFT

A few weeks ago, we noted that despite the early fanfare surrounding this oversubscribed offering, it’s safe to say the Lyft IPO is dead on arrival. Yesterday’s earnings reaction sealed the deal.

Now, those pesky fundamentals (or lack thereof) are taking center stage. Lyft’s shrinking share price is a stark reminder that the company is hemorrhaging money. This inconvenient truth didn’t matter when underwriters at JP Morgan were touting the “oversubscribed” IPO. But it certainly matters as the stock continues to find new lows just weeks after its debut.

We’ll have to see if Uber can break the ride-hailing losing streak when it debuts tomorrow.  If not, investors might sour on tech IPOs for the foreseeable future.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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