Those of you who’ve followed this blog for a while know I’m fascinated with the stock and commodities markets and how they work, and especially with how irrational they can be. I’m fascinated with how investors often throw rationality out the window and invest in companies that are less than viable in the long term. Their investments are based more on hype and hope than on any kind of rational decision based on actual data.
I ran into an article about Beyond Meat(TM) that illustrates just how ridiculous things can get. You can click the link up there to go read it yourself, but I’ll summarize it here.
When BM launched its IPO it was worth about $25 a share. Before the current stock market plunge hit, it was trading for $230 a share. That means the company is now worth more than Wendy’s, Jack ‘n the Box, Red Robin and Shack Shack combined, about $13 billion.
So, how is a company that had total sales of only around $65 million, has never made a profit, and is losing over $6 million a quarter, worth $13 billion? The answer to that question is, of course, it isn’t. Not even close. “Investing in Beyond Meat may be a worse idea than opening a video store in the age of Netflix.” is what a columnist at the Washington Times said when talking about the company.
And to make things worse, BM and its competitors are going after what is almost certainly going to be a relatively tiny niche market to begin with, fake meat, and pushing their products based on information that is, at best, misleading. While claiming it’s “healthier” than meat, what is actually in most of those products is some of the most unnatural and highly processed
garbage ingredients you can imagine. As the Washington Times’ Richard Berman said, the company “relies on consumers not knowing what’s in their products”. At a time when there is increasing evidence that the highly processed foods we’re shoveling into our mouths are harming our health, BM and the other fake meat manufacturers are pushing this stuff?
Of course this isn’t the first time people have gone a bit silly over companies. Not even close. It’s been going on forever. Look at Uber. Not only has Uber never made an actual profit, it loses, on average, billions of dollars a year. The latest data I heard was that Uber lost more than $5 billion just in the first quarter of 2019. The only reason it still exists at all is because people who should really know better keep sticking money into it in the hopes that they’ll get something, anything, out of it. You’d think that after the company had lost, oh, ten or fifteen billion people would realize there is something seriously wrong with their whole business model and get the hell out. But no, they keep pumping more and more money into it.
People are weird.