Shares of Beyond Meat Inc sank on Tuesday, as a lock-up period for its early backers ended, freeing them up to cash in on this year's doubling in its share price after results which pointed to growing costs at the plant-based meat success story.
It was unclear whether any of the company's early investors were among those selling in early deals, but analysts said that expectations some would cash in were likely to weigh on the stock in the short run.
"Approximately 3/4 of the shares come unlocked today, as many observers of Beyond Meat are aware. What is less apparent, though, is the number of shareholders willing to sell with the stock down well over 50% from its high," J.P. Morgan analyst Ken Goldman said.
"Either way, putting the lockup expiry in the past ultimately should incent some investors to start buying the stock again, though the shares could fade lower beforehand." Goldman wrote.
At a July peak, Beyond Meat shares had risen five-fold in value from its debut price of $46, but they have since retreated and closed at $105.41 on Monday, valuing the company at $6.38 billion.
The shares fell 16% to $88.50 in trading before the bell on Tuesday, making it the biggest loser among Nasdaq-listed companies.
'Offer More Discounts'
The vegan burger maker's quarterly numbers, published after the market closed on Monday, showed its first ever profit and raised its full-year sales forecast, but also said it would need to offer more discounts as competition heats up.
At least three Wall Street analysts cut their price target on the stock after the results, with J.P. Morgan's Goldman reducing his target to $138 from $189.
The end of the 180-day lock-up period, allowing employees, insiders and other early backers to sell has been well-advertised, but will contribute further to the pool of Beyond Meat shares available after the unusual and unexpected secondary offering of shares by the company in July.
"Heightened competition from new entries to the plant-based category represents the biggest downside risk to our (price target)," Credit Suisse analyst Robert Moskow wrote in a note.
"We believe that that increased liquidity ... will put the shares into a lower valuation range."
Of the 12 analysts who cover Beyond Meat, eight rate it 'hold', two 'sell' and only two now suggest buying its shares.