Beyond Meat Misled Its Investors, Class Action Lawsuit Claims

Beyond Meat faces a class action lawsuit over claims it misled investors about its production and growth plans.

The Retail Wholesale Department Store Union Local 338 Retirement Fund filed a lawsuit last week against Southern California-based Beyond Meat, a prominent player in the plant-based meat industry. The suit alleges that the company misled investors about its production and growth.

‘Engaged in a scheme to deceive the market’

The lawsuit targets Beyond Meat, as well as CEO Ethan Brown, and former executives Mark Nelson and Phillip Hardin, suggesting they “made materially false and misleading statements and omissions, and engaged in a scheme to deceive the market. These misleading statements and omissions artificially inflated the price of Beyond Meat stock and operated as a fraud or deceit” on shareholders.

According to the filings, Beyond Meat hyped up its collaborations with major quick-service restaurants including McDonald’s, Starbucks, KFC, Pizza Hut, and Taco Bell. But investors say the company claimed it would “ensure manufacturability” through “extensive testing” and could scale up production to meet the demands. The lawsuit claims Beyond Meat’s delays in meeting its QSR partnership goals were blamed on changing consumer patterns during the pandemic.

The suit says following Beyond Meat’s 2019 IPO, things have been unstable with stock prices jumping to $234.90 in July 2019, and dropping to $14.11 last October. That decline in stock value mirrored the decline in retail sales for plant-based meat. The suit covers any investor with holdings between May 5, 2020 — when the share price was at $100.50 — and Oct. 12, 2022 — when it dropped to $14.11.

Declining sales, dwindling workforce

By October 2021, the investors say “truth began to emerge” about the company’s instability following Beyond Meat’s adjusted revenue projections, which dropped 25 percent. Quarterly earnings saw a decline in sales including failed QSR relationships, and share prices dropped 20 percent.

Last year, the company announced a number of layoffs, thinning its workforce by nearly 20 percent. The news followed the announcement that McDonald’s would be ending its U.S. trial of the McPlant burger made with Beyond’s patty. While the burger is popular across Europe, the fast food chain said it failed to meet its U.S. targets.

The suit alleges that former employees reported “significant internal problems” stemming from “confusion and misalignment . . . [and] belated decision-making” that they say corresponded with exacerbated production delays. Those disclosures further dropped stock prices.

The lawsuit comes as the vegan meat producer announced its Q1 earnings exceeded expectations. It also announced a $200 million equity offering.