Fooled again (APPH)

AppHarvest announced that it has commenced a $40M secondary offering with a 15% overwrite. As part of the offering, the company released preliminary financial results. Revenue for the year was ~$14.55M, at the low end of the $14-17M range that management lowered when Q3 was reported. The preliminary adjusted EBITDA loss is expected to be ~$72M, at the high end of the -$67 to -$72M previous range. The company had $54M of cash at year-end, up from $36M at the end of Q3. It is not clear if the proceeds from the sale-leaseback of $127M on December 27 were received at year-end. So much for management’s comments on the last call, “We have been making good progress on securing non-dilutive financing to support our expansion.” At least management received stock-based compensation of $27M when the company had a net loss of ~$125M and shares declined 85% in 2022. 

Falling farm income (TSN, PPC)

Net farm income hit a record in 2022 according to the USDA. Now the agency is forecasting net farm income to fall 16% in 2023. The USDA ERS first net farm income forecast expects higher costs to pressure farm incomes, but the biggest driver is lower commodity prices. Cash receipts from farm sales are forecasted to fall 4.3% with dairy and hog farmers expected to see the largest declines. Crop sales are forecasted to fall by 3.1% while animal receipts are forecasted to fall by 5.7%. Farm costs are forecasted to rise 4.1% in 2023 after rising 18.5% in 2022, increasing the working capital needs. Direct payments from the government are projected to drop $5.4B or 34% due to lower disaster assistance.

Staples Insights | Fooled again (APPH), Falling farm income (TSN, PPC), Bang seeks funds (MNST) - staples insights 20823

The past two years have been good for farmers and 2023 is still expected to be above average for the past two decades. Farmers will respond to higher prices by producing more. Cash rent prices are also an indicator of the business prospects for farmers. More supply will lead to lower food prices and livestock would reflect lower prices quicker than most categories, but there is a lag. Pilgrim’s Pride reported “an extremely challenging Q4” EBITDA of $63M, down 80% YOY and down nearly half compared to consensus expectations. 

Staples Insights | Fooled again (APPH), Falling farm income (TSN, PPC), Bang seeks funds (MNST) - staples insights 20823 2

Bang seeks funds (MNST)

Bang Energy held a presentation with 1,200 people in attendance both in-person or online. The company is reportedly seeking to raise $580M from its distributors at a ~$10B valuation. The bankruptcy judge approved $335M in DIP financing last month. Worsened by the exit from PepsiCo’s distribution network, Bang has been the category share donor in the 2H of 2022.  Founder Jack Owoc is seeking investors who want to go for a ride with him. Keurig Dr Pepper passed on purchasing VPX for $2-3B six months ago. We held our Caffeine Black Book earlier this week which touched on Bang’s share losses, for the replay CLICK HERE