Beyond Meat's (BYND) Brutal Dilution

Beyond Meat just executed one of the most brutal shareholder dilutions in recent memory—316 million new shares issued overnight. Down 75% in the last week. Trading at $0.52. The plant-based dream has become more of a nightmare for equity investors.

https://lnkd.in/eB5ENTES

Not many people understand how traders can decide what the new company is worth. The math is actually quite simple - BYND did an exchange of A LOT of debt for A LOT of shares (from 78mm to ~400mm shares) and a little debt (They exchanged $1.1 bn of par value debt which traded at a fair value of $175mm for $200 mm of new notes). Because the debt was close to an even swap, the equity value didn't increase much, but now it gets spread among a lot more shares. Here's an illustration to help - as shares go up, price comes down: