Hot Milk

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What's going on?

Oatly floated on the US stock market on Thursday, and investors gave the plant-based milk maker a warm welcome: its share price immediately frothed up 30%.

What does this mean?

It’s no surprise Oatly’s newly public stock was in such high demand. Consumers’ environmental and nutritional concerns have pushed plant-based products into the mainstream, and investors have long been looking for ways to back the companies fueling the category’s rise.

Their enthusiasm allowed Oatly to price its initial public offering (IPO) at the top end of its intended range, raising more than $1.4 billion in the process. The company plans to spend part of the proceeds on paying back a sustainability-linked loan, with the rest funding its ongoing expansion in the particularly fast-growing oat milk market – as well as the development of new products like plant-based cheese.

Why should I care?

For markets: Competition? What competition?
The IPO valued Oatly overall at $10 billion – a tidy step up from $2 billion just ten months ago (tweet this). That valuation amounts to 24x last year’s sales, compared to Beyond Meat’s 16x and Danone’s relatively paltry 2x (which might be because its two plant-based milk brands – Alpro and Silk – are just small cogs in a much bigger dairy machine). But even as new competition keeps coming onto the scene, Oatly’s ubiquitous brand means its growth is – at least for now – continuing to outstrip its rivals’.

The bigger picture: There’s even more room for plant-based milk to grow.
Oatly’s successful IPO came the day after website-hosting service Squarespace’s shares fell 13% on their own market debut. The difference might in part be down to a precedent set by Beyond Meat: the company’s stock price has risen more than 300% in the two years since it went public, despite a few ups and downs along the way. Investors, then, may well expect Oatly to be to plant-based dairy what Beyond Meat’s been to plant-based meat.

Originally posted as part of the Finimize daily email.

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