Shareholders of Beyond Meat have launched a proposed class action in Los Angeles federal court, accusing the plant-based meat company of misleading investors by concealing the possibility it would need a sizable writeoff of long-lived assets. The complaint, filed on Friday, contends that the company repeatedly highlighted a push to cut costs and widen margins for much of last year without disclosing that assets such as a manufacturing plant, equipment and leases might require impairment.
According to the suit, the company delayed releasing financial results last fall and subsequently recorded a $77.4 million writedown, which contributed to a $112.3 million loss for the third quarter. The filing says the market learned the full picture only after the delay and the disclosure of the impairment. The company also reported falling sales that included a 21% decline in the United States, which the lawsuit notes weighed on results.
Plaintiffs led by Mustafa Aljendan say they purchased shares at prices they describe as artificially inflated because the company and its senior executives misrepresented Beyond Meat's prospects. The complaint seeks unspecified damages to recover losses suffered by shareholders.
The complaint points to a sharp fall in the stock price during the autumn. The suit notes the share price dropped from $2.84 on October 24, when the company warned a writedown might be required, to $1.12 on November 12, after the company confirmed the impairment - a decline the filing links to the delayed disclosure and the magnitude of the writedown. The lawsuit also references a broader long-term decline in the share price from its peak near $240 in July 2019.
The company did not immediately respond to requests for comment on Sunday and Monday, according to the filing. Beyond Meat has not posted an annual profit since its 2019 initial public offering, and the filing notes that overall sales are on track to fall for a fourth consecutive year. Among its competitors cited by the complaint is Impossible Foods.
In early Monday trading, shares were quoted down 2 cents at 89.5 cents, reflecting the ongoing pressure on the stock amid the legal action, financial losses and sliding sales. The plaintiffs allege that the combination of public messaging about cost controls and margin focus, followed by the delayed recognition of a material writedown, amounted to a deceptive presentation of the company's financial health.
The lawsuit centers on disclosure practices and the timing of material financial information, and it seeks to hold the company and certain executives accountable for alleged investor losses. The complaint does not specify the dollar amount of damages being sought.
Contextual note - The complaint attributes investor losses to the sequence of public statements and subsequent financial disclosures, and it identifies operational writeoffs and sales declines as the core factual basis for the suit.