Beyond Meat is on the move again, trading in big swings and burning short sellers

Beyond Meat “Beyond Burger” patties made from plant-based substitutes for meat products sit on a shelf for sale on November 15, 2019 in New York City. Vegetarian alternatives to burgers and sausages, revived by start-ups like Beyond Meat and Impossible Burger, are enjoying a certain enthusiasm that meat giants also want to enjoy.

ANGELA WEISS | AFP | Getty Images

Trading of Beyond Meat was briefly halted on Tuesday for volatility as the meat substitute stock has once again been on a wild ride.

The recent spike began on Jan. 7, the same day rival Impossible Burger said it would not be able to produce enough burgers to partner with McDonald’s. Shares of Beyond jumped 12.5% that day and have kept climbing, rising by an additional 40% by the time the market closed on Monday. McDonald’s also said last week that it was expanding its test run of Beyond Meat in Canada.

Shares were up as much as 18.2% on Tuesday, then reversed before being halted. The stock is about 2% for the day and is trading above the target price of every analyst listed in FactSet.

The recent run is likely due to a combination of the McDonald’s news items and short sellers getting squeezed, said Donald McLee, an analyst at Berenberg.

“For me, they were modest positives, but I think the market read them as really strong positives — that drove the stock up,” McLee said. “And I think what you’re seeing now is the short covering.”

For investors who bet against the company by borrowing shares and then selling them, taking a short position, a spike by the stock could mean big losses and margin calls from brokers. As a result, the shorts may have to buy shares to cover their positions, giving the run more fuel.

Ihor Dusaniwksy, the managing director of S3 Partners, said in a tweet that more than 40% of the float, or shares available for trading, were short positions, putting those traders more than $500 million in the hole just this month.

Ever since it went public last May, Beyond Meat has been a volatile stock. Shares jumped 163% on the first day of trading, and its highest closing price of nearly $235 in July was more than $200 above its initial public offering price.

The stock then came crashing back toward earth. As the stock slumped from its peak, Beyond Meat announced a secondary offering and shares fell more than 10%. Then, as a lockup from the IPO expired at the end of October, allowing early investors and insiders to sell their shares, the stock fell back below $100 per share.

Bernstein’s Alexia Howard, who has a price target of $106 per share for the stock, said in a note to clients last week that the stock was more reasonable for institutional investors now that its total shares had increased. McLee also said that institutional investors may be slowly coming off the sidelines and helping the stock rise.

“Even towards the end of last year, I know a lot of people were saying, ‘even if they stock’s too volatile for us at this point, we need to do the work,” McLee said. “And I think maybe now that you’ve seen the calendar flip over, on the institutional side people are taking a closer look and actually putting in positions.”

For its most recent quarterly report, released in October, Beyond Meat reported $92 million in revenue. Its share price on Tuesday gave it a market cap of roughly $7.2 billion.

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