The Covid-19 pandemic has accelerated a pre-existing trend of retail investors buying sustainable stocks to add more environmentally and socially friendly options to their respective portfolios..
Although the 2022 IPO market has been impacted by factors related to inflation, the ongoing pandemic and geopolitical strife in Eastern Europe, investors can still expect a series of IPOs high-level sustainability-focused projects over the next few months, particularly in the meat sector. substitute foods.
With plenty to do about sustainable actions at a time when post-pandemic societal changes are causing more and more consumers to pay attention to ESG (environmental, social and governance) actions, Maxim Manturov, head of investment advice at Freedom Finance Europe (Freedom Holding Corp. (Nasdaq: FRHC), shares its thoughts on two of the most exciting sustainability-focused IPOs of 2022:
Global attention turns to sustainability
Over the past two years, we have seen a significant shift in the volume of retail investors buying into companies that have strong ESG credentials that can be traced. We find that sustainability is becoming important to business because of the connection between changing global conditions and the continuing evolution of consumer interests. In this regard, the future of the planet has become not only a major issue for the public, but also for corporate strategy.
Improving sustainability is a challenge faced by many businesses and can have implications for supply chains, business operations, employee well-being and the natural resources needed to run your business. .
By seeking to improve sustainability, a company can actively improve shareholder confidence while achieving its altruistic goals. This, in turn, can boost a company’s stock performance as more ESG-focused investors look for sustainable options.
From the available evidence offered by sustainability-focused bonds like the S&P Green Bond Select Index, we can see that benchmarks are continuously outperforming and an acceleration in cumulative investment returns after an initial dip in early 2020 as the Covid-19 pandemic triggered a widespread sell-off in stocks. off.
One of the sectors that has seen strong growth in recent years, as consumer interest in sustainability has gained momentum, is that of meat alternatives. According to analysts, there are many reasons to be optimistic about the industry for the next decade.
Furthermore, a recent Bloomberg Article suggested that the global plant-based protein market will reach a value of $162 billion by 2030. Complemented by this growth, sales of plant-based meat and fish substitutes could account for up to 5% of the total market meat and fish during the same period. Time range.
According to figures from the second half of 2021, the alternative meat market is currently worth around $4.2 billion and could reach around $74 billion within 10 years if it follows the same growth patterns as the meat market. plant-based meat. This indicates growth of more than 1,750% and goes some way to how important potential IPOs of meat alternatives can mean to retail investors.
With that in mind, let’s take a look at two sustainable meatless IPOs slated to debut in 2022 that could offer strong long-term upside for investors:
- impossible foods
Founded in 2011 and based in Redwood City, CA, Impossible Foods is a startup focused on creating the next generation of plant-based meat and cheese alternatives. The company excels in selecting specific proteins and biologically significant elements from green vegetables, seeds and grains.
It is through these diverse combinations that can pave the way for the production of many meat and dairy alternatives.
The goal of Impossible Foods’ mission is to combine the enjoyment of food with the safety of the humans who consume the products and the animals – thereby eliminating the use of animals from the production chain.
In 2019, the FDA approached an important ingredient for Impossible Foods — a plant-based blood mimic, which allows the company’s Impossible Burger line to deliver a realistic beef appearance and taste.
In terms of fundamentals, Impossible Foods has raised a total of $2.1 billion in funding rounds, with the last round of investments arriving in November 2021, with a $500 million investment from Mirae Asset Global Investments. The startup’s latest valuation valued the company at $7 billion — a value that is expected to rise provided meatless alternatives continue to grow in popularity.
In April 2021, sources close to the company reported that a Impossible Foods IPO was likely to occur within the next 12 months. However, due to market volatility, the debut is more likely to take place in the second half of 2022.
Huel is a British company that has grown rapidly in the continental European, US and Japanese markets. The startup specializes in food substitutes in the form of powders, drinks, snacks and other alternatives. Currently, Huel has an estimated market capitalization of £1 billion.
One of Huel’s greatest strengths is its social media presence, which has shown time and time again that it can appeal to a large audience of young consumers who are not only interested in sustainability, but also focus put by the company on providing fitness-focused alternatives to meat.
The startup is said to have tapped Goldman Sachs and JP Morgan as advisers for a possible London IPO in 2022. Investment banks are also circling in anticipation of a possible sale of the company – although at this point, an IPO is considered the preferred solution. option.
Significantly, the company’s turnover in July 2020 was almost 30% higher than the previous year, with Huel taking in £71.6m.
Looking for clues from the past
So what can we expect from Impossible Foods and Huel after their IPO? The metrics look solid considering the case of Beyond Meat, which saw a launch day rise of $167.2 (to $66.79) after the company debuted at a price of $25 IPO in 2019. Prior to the lockup, the stock had rebounded 545% to a price of $161.24.
However, investors should be wary of growing competition in the field. As the industry is still emerging, market leaders may come and go and if a more innovative product appears in the market, otherwise high quality companies may start to suffer.
With this in mind, it is always worth researching and reviewing the respective fundamentals for upcoming IPOs, even if they are in promising sectors. But as consumer interest in sustainable products continues to grow, there is no doubt that the meat substitute market is set to increase in value over the decade.
DISCLAIMER: THIS CONTENT IS NOT INTENDED AS INVESTMENT ADVICE