Is investing in VERY worth the risk?

Marc Challande
3
minute read

The Very Good Food company is an emerging plant-based food technology company that designs, develops, produces, distributes, and sells a variety of plant-based meat and other food alternatives. The company’s mission is to employ plant-based food technology to create delicious products while maintaining a wholesome nutritional profile. Despite seeing its stock price down by 90% YoY and many tumultuous intern stories, the stock seems to have bottomed, and it could be interesting to start a position in it.

Sector Overview

The Plant-Based food market is a high-growth-type sector. If the industry is currently worth US$44B in 2022, many indicators show the market could reach US$77B in 2025 and reach US$95.2B by 2030. Talking about CAGR, it would mean an increase of ~12% each year!

In the last couple of years, there has been a change of mind about eating meat, and many persons went towards plant-based food. According to many surveys, 10% of the current population is vegetarian globally. This new mindset has also been buoyed by the new generations, led by the millennials. They represent 40% of the existing clients, followed by the Baby boomers and the Gen-X, accounting for 21% each.

Company Overview

The company’s main objective is to get millions to rethink their food choices by offering plant-based food options. The Very Good Food owns a diverse portfolio of clean, healthy plant-based alternatives that address concerns regarding highly processed, highly-additive foods—targeting to achieve non-GMO certification for all products.

The Very Good Food is currently strengthening the structure and the management board. Over the last 4 months, four executive members joined the company. Matthew Hall has stepped down as interim Co-Chief Executive Officer and company directory but will continue supporting VERY GOOD in an advisory capacity. Parimal Rana, a seasoned food industry professional and Very Good’s Vice President of Operations, is assuming the role of Chief Executive Officer.

In the meantime, the company announced that it had been granted an additional 180-day period from Nasdaq’s Listing Qualification Department or until January 9, 2023, to regain compliance with the minimum US$1 bid price requirement for continued listing on The Nasdaq Capital Market.

Recent News

July 13, 2022: The Very Good Food Company announced that Saul Cooperstein would join the Company’s Board of Directors as an independent director, effective July 13, 2022.

Saul has over twenty years of experience in food and beverage, technology, and finance. He currently serves as the Chief Strategy and Development Officer of Virtual Dining Concepts, the leading platform of virtual brand solutions for the restaurant industry.  In addition, he currently serves as an advisor for several venture-backed technology start-ups, including fintech platform Creative Juice, which he co-founded.

Saul has held additional leadership positions in the food and beverage industry, including at C3 (virtual restaurants), Barilla America, and Umami Restaurant Group.  He also served as a member of Umami’s Board of Directors and 800 Degrees Neapolitan Pizzeria’s Board of Managers.

Share Structure/Financials

The share structure is divided by Public & other investors (65%), institutions (11%), Individuals/Insiders (22%), Venture Capital & Private Equity firms (2%).

As of March 31, the company had 138M shares fully diluted. We can account for 118M shares outstanding, for 7M options (According to the Corporation’s stock option plan, each Option entitles the holder to purchase one Common Share at exercise prices ranging from $0.25 to $9.07 per Common Share), and 13M warrants (weighted avg price: $3.51) which could grant the company to leverage $46M in cash if the share price goes above the exercise price. The company also has $7M in loan capital (Represents the amount drawn under the Credit Facility as of March 31, 2022. The Credit Facility consists of a revolving credit facility available to a maximum of $20,000,000 and a term loan available to a maximum of $50,000,000 (the “Term Loan”). The company plans to use the credit facility for general corporate purposes, including, among other things, supporting working capital, making potential acquisitions, and, in the case of the Term Loan, purchasing equipment for the Patterson Facility and other production facilities. Drawdowns and the receipt of proceeds under the Credit Facility are subject to the Corporation satisfying specific terms and conditions).

Very Good Food is traded on the Canadian (TSXV: VERY.V), the US (NASDAQ: VGFC), and the UK  (FSE: OSI) exchanges.

On Q1 2022, the company’s revenue decreased by $624,739 or 24%, to $2,018,344 in Q1 2022, compared to $2,643,083 in the same period in 2021. The decrease was driven by a decrease of $1,103,735 in eCommerce sales, offset by an increase of $427,014 in wholesale revenue. Wholesale revenue increased 123% to $772,919 in Q1 2022 compared to the same quarter last year due to increased stores and distribution points and increased unit velocities on core and new items. General and administrative expense("G&A expense") decreased $4,993.039 or 58%, to $3,637,737 in Q1 2022, compared to $8,630,775 in Q4 2021. Excluding share-based compensation and depreciation expense, adjusted general and administrative expenses decreased by $135,671 (2%) to $5,605,666 in Q1 2022 compared to $5,741,337 in Q4 2021.

Bottom Line

The company hasn’t made any profit yet, is facing the NASDAQ-180-days pending limit, and sees its executive board being restructured. Let’s not forget the stock is also down 90% Yoy. Today, it appears than investing in VERY looks more than risky. If you like risks, the company would be a great fit for you.