Blockbuster Beyond Meat IPO Puts These ETFs in Focus

Vegan burger maker Beyond Meat Inc BYND made a sizzling debut on Nasdaq on Apr 2 as its shares skyrocketed more than 160% on the first day at the close. This is much better than the first-day performance of recent hot IPOs such as Lyft LYFT, Pinterest PINS, and Zoom Video Communications ZM

With the astounding surge on the first day, Beyond Meat became the best IPO for a U.S. company with a market cap of at least $200 million since 2000, according to Dealogic data (read: IPO ETFs Red Hot on Zoom & Pinterest Debuts).

The IPO pushed Beyond Meat’s market capitalization to around $3.9 billion. This plant-based meat maker has raised nearly $241 million through the IPO offering of 9.63 million shares at $25 – the high end of the anticipated range of $23-25. The company had increased the price range from $19-$21 per share on heavy investors’ demand.

Beyond Meat: A Good Bet?

Beyond Meat creates substitutes for meat by using ingredients that mimic the composition of animal-based meat like proteins from peas, fava beans and soy. About 70% of the company's revenues are generated by its flagship Beyond Burger patties and it also sells imitation sausages and vegan ground beef.

It reported revenues of $87.9 million and a net loss of $29.9 million in 2018. Though the company warned that it may never turn to a profitable company, it enjoyed rapid sales growth with revenues surging 170% in 2018.

As large number of Americans are looking for vegan or vegetarian diets amid growing concerns about health risks and environmental hazards, plant-based meat substitutes are growing in popularity. Given that Beyond Meat is the first publicly listed veggie meat company, investors are jumping into the space to cash in on the opportunity from the growing popularity of plant-based meat alternatives (read: U.S. IPO Market Buzzing Hot: ETFs to Tap the Boom).

The Los Angeles-based company aims to market its meatless burger patties and other products to meat-loving consumers. It avoids terms such as vegan or vegetarian and instead displays its products in the meat section of supermarkets.

ETFs in Focus

The successful market debut of Beyond Meat could pave its entry into a number of ETFs in the coming days. Investors seeking to take advantage of the plant-based meat alternatives market could play these ETFs in the months ahead.  

Renaissance IPO ETF IPO

This fund provides exposure to the largest and most-liquid newly listed companies by tracking the Renaissance IPO Index. New companies seek inclusion on a fast entry basis on the fifth day of trading. The fund currently holds 73 stocks in its basket, with each accounting for less than 7% exposure. Technology is the top sector accounting for 35.6% share while communication services and real estate round off the next two spots with double-digit allocations each. The fund has amassed $40.4 million in its asset base while trading in a light volume of about 18,000 shares, probably implying additional cost beyond the expense ratio of 0.60%. The product has surged about 34% in the year-to-date period (read: IPO ETFs in Focus Ahead of Uber's Public Debut).

First Trust US Equity Opportunities ETF FPX

This ETF focuses on the largest, best-performing and most-liquid U.S. IPOs and follows the IPOX-100 U.S. Index. New companies can find entry into the fund’s holding after trading for a minimum of 100 days. In total, the fund holds 100 securities in its basket with the largest allocation going to the top firm with 9.5% share while other securities hold no more than 4.51% of the assets.

The product is tilted toward information technology at 31%, while healthcare, consumer non-cyclicals and consumer cyclicals round off the next three with double-digit exposure each. The fund has accumulated $1.1 billion in AUM and witnesses volume of about 101,000 shares per day. It charges 59 bps in fees a year and has gained 22.5% so far this year.

First Trust Nasdaq Food & Beverage ETF FTXG

FTXG offers exposure to U.S. companies within the food and beverage industry by tracking the Nasdaq US Smart Food & Beverage Index. It holds 30 securities in its basket with none accounting for more than 9% share. It has AUM of just $2 million and charges 60 bps in annual fees. It sees a meager average daily volume of under 1,000 shares and is up nearly 13% so far this year. FTXG has a Zacks ETF Rank #4 (Sell) (read: Valuations Still High in Consumer Staples: 6 ETFs to Shun).

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