Thursday morning brought choppy trading to Wall Street, as market participants tried to parse through the latest decision from the Federal Open Market Committee to leave U.S. interest rates unchanged. An early rebound gave way to greater nervousness about sustained economic expansion. As of 11:30 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 168 points to 26,262. The S&P 500 (SNPINDEX:^GSPC) dropped 14 points to 2,910, and the Nasdaq Composite (NASDAQINDEX:^IXIC) fell 27 points to 8,022.
A couple of key news items from the capital markets showed the highs and lows of the current market environment. After having faced pressure recently, Tesla (NASDAQ:TSLA) decided to turn to investors to raise more cash by selling stock and bonds. At the other end of the spectrum, plant-based meat-substitute pioneer Beyond Meat (NASDAQ:BYND) said it would make its debut as a public company, pricing its initial public offering and providing another sign of the strong appetite for IPOs right now.
Tesla makes its move
Shares of Tesla rose 2% after the electric-vehicle manufacturer filed disclosures with the U.S. Securities and Exchange Commission to offer a combination of securities to investors in order to raise cash. The move came just days after CEO Elon Musk had told shareholders that Tesla might turn to the public markets for more financing.
Specifically, Tesla said in a statement that it would offer $650 million in common stock to investors. In addition, the automaker will offer $1.35 billion in five-year convertible senior notes. In both cases, underwriters will have the right to purchase up to 15% more than initially offered, bringing the total potential capital raised up to the $2.3 billion mark.
Musk will also participate in the offering by buying $10 million in Tesla stock. That won’t be enough to prevent his current position in the shares from being diluted, but it will cushion the blow somewhat.
Investors reacted favorably to the move, even though it still leaves some key questions unanswered. As the CEO said following Tesla’s release of first-quarter financial results, “I don’t think raising capital should be a substitute for making the company operate more effectively.” How Tesla will improve its operational and financial discipline remains to be seen, but at least the electric-vehicle pioneer won’t have to worry about having enough cash available for a while longer.
Beyond Meat heads for the Nasdaq
Shares of Beyond Meat hadn’t yet opened for trading as of 11:30 a.m. EDT, but excitement surrounding the meat-substitute manufacturer’s initial public offering was palpable. After having set an initial range for its pricing of between $19 and $21 per share, Beyond Meat said earlier this week that it had boosted its IPO price projections to a higher range of $23 to $25 per share. It also increased the number of shares it would sell by 10% to 9.625 million. The final pricing came out at the top end of that range, raising roughly $241 million for the company.
Beyond Meat’s mission includes four primary planks: improving human health, lessening climate change, promoting animal welfare, and easing pressure on natural resources. Traditional livestock production creates problems in all four of those areas, and CEO Ethan Brown and his company believe that by using plant-based ingredients that simulate meat favorites like burgers and sausage, Beyond Meat will be a better alternative that conscious consumers can use — and that conscious-capitalist investors can profit from.
Already, the trend toward plant-based food is building up steam. Burger King recently said that it would start offering beef alternatives using the Impossible Burger product, a competitor to Beyond Meat, and the appetite for the product has already stoked fears of a shortage. In the long run, the key to Beyond Meat’s success will be whether it can convince mainstream consumers that its product’s advantages are worth making the switch from regular meat — and many investors are convinced that it will.
