For Beyond Meat Inc. short-sellers, this week couldn’t come soon enough.
The alternative meat maker that’s been on fire since its IPO in May suddenly shed a quarter of its value after insiders including CEO Ethan Brown got a jump on post-IPO trading restrictions and cashed out some of their holdings, at the same time as the company made a deeply discountedsecondary offering of stock.
All that served to easily overshadow what might have otherwise been seen as a strong earnings report last week.
Beyond Meat bears who have patiently awaited some type of catalyst that would reverse the high-flying stock’s momentum, made about US$285 million in mark-to-market profits this week, according to financial analytics firm S3 Partners head of research Ihor Dusaniwsky. Unfortunately for them, they’re still down more than US$742 million since the IPO, he said.
But Beyond Meat short-sellers are apparently undeterred. Short interest remains at nearly half of the shares available for trading -- even as the cost to borrow the stock has surged. In fact, at more than 100 per cent, the cost of shorting Beyond Meat is the highest of all U.S. stocks, according to the latest data from S3 Partners.
Strangely enough, most sell-side analysts agree with short sellers that Beyond Meat doesn’t offer compelling value at these prices, and see more declines ahead. The average analyst price target still implies about a 15 per cent pullback in Beyond Meat shares, according to data compiled by Bloomberg.
Earnings "results were impressive, but even this does not justify the current capitalization," Freedom Finance analyst Erlan Abdikarimov, who has the only sell rating on the stock, wrote in an email. The latest stock offering and the steep discount at which it priced, "says a lot."
Beyond Meat’s latest stock sale is expected to close on or about August 5.