A week to forget for FFF’s listed FoodTech

By Frank Buhagiar on Monday 13 March 2023

A week to forget for FFF’s listed FoodTech
Image source: A week to forget for FFF’s listed FoodTech
CommentaryFoodTech Investment

Food on the Move: FFF’s weekly roundup of listed FoodTech’s movers & shakers

With the Nasdaq posting a weekly loss of 4.7%, FFF’s listed FoodTech space was always going to find the going tough during the week that ended Friday 10 March.  And so, it proved.  How tough? Over four times as many share price fallers than risers. That’s how tough.  In all, there were 38 fallers, nine risers and two non-movers.  A week to forget then.  But before the last five trading days are consigned to the history books never to be mentioned again, a quick-fire round-up of the week’s movers and shakers is in order.

Vertical farmers led the fallers – AppHarvest (APPH) off 30.78%; Local Bounti (LOCL) off 18.45%; and Kalera off 8.4%.  No mystery behind the falls.  APPH’s full year results on their own enough to set the tone. In line US$14.6m revenues, up 61% on the previous year, were not the problem.  The US$1.69 loss per share was.  That number missed analyst estimates by 44%.  Overall, the company reported a full year net loss of US$176.6m, 6.3% more than the previous year.

Founder and CEO Jonathan Webb is hoping 2022 will prove to be the trough though: “We are now at an inflection point in our business transitioning from construction to an intense focus on operations with our new Chief Operating Officer (COO) Tony Martin, leveraging his deep experience in the sector to help accelerate our path to profitability through the consistent delivery of high-quality produce.”  Onwards and upwards for the vertical farmer then?

Elsewhere, Burcon Nutrascience (BU) shed almost a fifth of its value.  The seeds of the fall were planted last month when BU issued a “Shareholder Letter Regarding JV, Merit Functional Foods”. In the letter, management flagged that it was “exploring interim financing for Merit while working on a more specific, longer-term funding solution”.  One month on and the company now plans to submit a formal offer for the plant protein processor.

Why? As reported by AgFunder News, “Merit Functional Foods produces high-purity pea and canola proteins from a plant in Winnipeg, Canada. The plant deploys Burcon’s patented mechanical processes, which it claims enable formulators to include higher levels of plant protein isolates in challenging applications such as low pH beverages without negatively impacting flavor or texture.” Unfortunately, as Merit co-CEO Ryan Bracken explained, the company “couldn’t quite get to the level of cashflow needed to operate the business profitably, quick enough.”

Burcon CEO Kip Underwood believes a tie-up is the solution: “Burcon has the process engineering expertise to improve bottom line performance through production efficiency gains.  Moreover, by leveraging Burcon’s innovation portfolio to launch new plant proteins…Burcon can access new markets achieving faster growth.  These compelling business synergies are why Burcon continues to work towards capitalizing on this significant opportunity.”

Burcon is in a strong position to make a bid as it already holds a 31.6% stake in Merit.  And BU is in good company – US agribusiness Bunge spent C$30 million to acquire a 25% stake in mid-2020, while the Canadian government has also invested around C$100 million.  Is a BU share issue on the cards? Investors appear to think so, preferring to sell first and ask questions later it seems.   

One company that has launched a public offering is CubicFarm Systems (CUB).  Last week, Food on the Move noted that the AgTech had yet to provide an update on its CAD5million public offering, despite indicating the raise would close on or around 23 February.  The shares finished the week ended 3 March up 36% at CAD0.75, 50% higher than the CAD0.5 offer price.  A sign the raise was going well perhaps?  One week on and the AgTech did finally put out a press release: “CubicFarm Systems Corp. Update on Previously Announced Marketed Offering of Units.”  Not the most promising of titles.

And not the most promising content: “The proposed issuance of the Units and Compensation Warrants will represent a potential dilution of 114% on a fully diluted basis and a price discount of the Units and Compensation Warrants of 27% relative to the market price on February 15, 2023, being C$0.068. The Company has applied to the TSX…for a ‘financial hardship’ exemption from the requirement to obtain shareholder approval for both the proposed dilution and the discount to the market price, on the basis that the Company is in serious financial difficulty and the Offering is designed to address these financial difficulties in a timely manner.”  Shares didn’t react well to the release, ending the week down a third.

A week to forget for CUB and the rest of the FoodTech sector for that matter.