Is clean-eating investment company Agronomics worth a punt or should you save your money?
This week saw Agronomics take a large position in clean meat player Simply Foods, its first investment since shifting its focus onto environmentally friendly food products earlier this year. Here, we ask if an investment in the firm presents an opportunity to get exposure to an exciting long-term move away from meat consumption or is simply an expensive and risky way of throwing money at society’s latest fad.
Agronomics has undergone a great deal of change since March. Indeed, as well as changing its name from Port Erin Biopharma Investments, the firm has adopted a new investing policy. It is now focused on the life sciences sector, focusing specifically on environmentally-friendly alternatives to traditional meat production as well as plant-based nutrition sources.
To do this, it will invest in the equity of both quoted and unquoted enterprises operating in these areas and collective investment schemes with exposure to the life science sector. It plans to translate this into shareholder value by exiting positions when it believes they begin to look over-valued or when they are forced out following a trade sale. To support it in its new journey, Agronomics raised £4.5m at 5p a share in an oversubscribed placing last month. This means a significant portion of its current £9.64m market cap is underpinned by cash.
Agronomics’ new focus on the life sciences sector is backed up by a great deal of relevant management experience. After changing its emphasis, the organisation appointed businessman investor, and entrepreneur Richard Reed, CBE, as its non-executive chairman and non-executive director. Reed is the co-founder of Innocent Drinks, a business known around the world for its fresh fruit smoothies and vegetable pots. The majority of the company sold to beverage conglomerate Coca-Cola for more than $500m in 2013.
Meanwhile, Agronomics also hired David Giampaolo as a non-executive director. Giampaolo is a well-known entrepreneur in the global health and fitness sector and currently serves as chief executive of London-based investor club Pi Capital, where he is also a significant shareholder. He has been historically involved in health and fitness names like Fitness First, and Zumba Fitness as an investor, advisor, and board member.
Finally, Agronomics continues to benefit from the experience of its former non-executive chairman Jim Mellon. Mellon, who now sits as a non-executive director, is a well-known fund manager who founded and led businesses like Thornton Management and Regent Pacific Group. In recent years, he has invested widely in the biopharma sector alongside his ongoing commitments in the natural resources space.
It is worth noting that all three board members also took part in last month’s placing, with Reed and Giampaolo both investing £100,000 while Mellon injected £1.1m to give him a 25.4pc stake.
As it stands, Agronomics has made two investments in line with its new policy. Interestingly, the first of these came last August, when the firm injected $250,000 into an early-stage enterprise called BlueNalu for a 2pc stake. BlueNalu is focused on manufacturing ‘clean’ seafood by growing cells of certain aquatic species in bioreactors eventually for human consumption. BlueNalu’s goal is to partner with leading foodservice and retail channels and provide a ‘broad line of distinctive and differentiated seafood products’. The San Diego-based company recently claimed that it close to producing its first edible piece of fish to its staff.
Agronomics’ second and most recent investment came earlier this week when it took a 7pc position in clean meat business Simply Foods for nearly $700,000. It also has the right to appoint a ‘board observer’ to Simply Foods’ board. According to Agronomics, Simply Foods is the first firm to produce and serve a pork sausage tasting prototype grown in a lab using cells from a pig.
Agronomics new policy gives it exposure to numerous trends that have the potential to create value. Critically, the firm has aligned itself with society’s increasing awareness of climate change and the growing acceptance and popularity of lifestyle choices such as veganism and clean-eating. As well as meeting the needs of those with meat-free diets, products like those created by BlueNalu and Simply Foods are thought to cut greenhouse gases and reduce the land and energy usage among farmers. As environmental consciousness continues to grow and pick up momentum, a firm that has had exposure from an early stage will be exceptionally well-positioned.
That being said, as is the case with any business backing start-up firms, there are definite risks associated with investing in Agronomics. Chiefly, there is a very high chance that one or more of its holdings will fail – the simple reality is that, more often than not, startups never reach commerciality.
In Agronomics’ case, this risk stems from the early-stage nature of the products being offered by its holdings, which are both very much in the ‘idea’ stage at present. For example, according to this article, New Age’s first lab-grown sausage cost around $3,000 to make. This has since been reduced to £145 (that a lot of packs of Richmond sausages), and the company does not expect to reach commerciality until 2021. Indeed, some industry commentators believe that it will be ten years until clean meat products are served regularly in restaurants.
All to play for
Although the risks are clear, the vast upside potential offered on offer to investors in Agronomics is also apparent – momentum has already seen shares soar to 9.25p from 5.5p at the beginning of June. The bottom line is that this company should be considered to those who are willing to take on high levels of risk in exchange for the potential for substantial returns. Tax benefits aside, this is precisely the same reason why people put the money they can afford to lose into Venture Capital Trusts and private equity funds. Agronomics has entered an exciting and potentially game-changing industry, and I will be keeping a keen eye on it over the coming months and years.