With Oatly Seeking a Substantial IPO, Should Investors Take the Bait?

For plant-based product brand Oatly, even bad publicity is good publicity. After CEO Toni Petersson sang a jingle on a Super Bowl commercial worth $5.6 million, everyone was talking about the company—for better or worse. Now, the Oatly IPO has jumped in value.

With a 500 percent increase in Oatly's projected IPO valuation, investors are wondering whether holding shares in the company is a lucrative or overvalued move.

As Oatly looks forward to a hefty IPO on the NYSE, interest in a Hong Kong listing seems to have stalled. After the Super Bowl ad—which was actually a re-air of a 2017 commercial that seems to have been produced on the lowest budget imaginable—America is the focus.

Oatly, a Swedish company, has a history of fighting dairy lobbyists both at home and abroad. In early 2019, the FDA made it more difficult for plant-based milk makers in the U.S. to call their products "milk." Plant-based milk brands responded by removing the space in the terms, instead writing "oatmilk" or "almondmilk." Although the tweak angered dairy lobbyists, it satisfied the FDA. Today, analysts estimate that plant-based milk accounts for 14 percent of all milk retail sales in the U.S. 

Oatly expects to go public as soon as May 2021. The final date depends on market considerations as we near the target month. It looks like the company with be opting for a traditional IPO rather than listing directly or through a SPAC.

Analysts had projected a hearty $2 billion IPO for Oatly. However, following a forecast may have been too predictable for Oatly—the company is now seeking an offering worth $10 billion. 

With such a large valuation, the Oatly IPO surely raises some questions on whether that valuation is deserved. Overvaluation could mean enhanced volatility. Also, early investors seek good returns, not steep entrance fees with little room to climb. Once Oatly releases a firm price per share for its IPO, investors will have a better idea of if the stock is a fair bet. 

Looking at how peers in the alternative food space have fared since their IPO gives some food for thought. Since it went public in May 2019, Beyond Meat (NASDAQ: BYND) stock has risen 139.89 percent. And within two months of the debut, BYND peaked, skyrocketing 251.7 percent. Knowing this, it seems the Oatly IPO would be best approached on a dip, whether that's shortly after the stock goes public or after volatility has largely quelled. 

IPO stock is often reserved for preferred investors. Check with a brokerage that trades stock on the NYSE and look into its terms for IPO investing. Online brokerages such as Schwab, Robinhood, and E-Trade offer limited IPO shares. As a retail investor, you'll most likely get in at the climbing rate.