Beyond Meat Jump Hurts Short Sellers, Sets Them Up for a Squeeze

Carmen Reinicke and Katrina Compoli, Bloomberg News

, Bloomberg

(Bloomberg) -- Beyond Meat Inc. jumped as much as 61% in intraday trading Wednesday — its best one-day move since 2019. The surge is setting traders who have bets against the stock up for a lot of pain.

Short sellers are down nearly $74 million in paper losses, according to data from S3 Partners LLC. The growing value of positions against Beyond Meat also puts traders at risk of a short squeeze, a phenomenon where short sellers are forced to buy back the stock to unload their losing positions. The short covering drives the company’s share price higher, adding further pressure to contrarian traders.

In addition to the rally, Beyond Meat is a crowded short position. Shares available to short make up about 38% of total shares outstanding, there are almost no shares left to borrow to short and the stock boasts a 310% borrow fee, per S3.

“There are going to be shorts getting squeezed out of this trade due to both high stock borrow costs and large recent mark-to-market losses,” said Ihor Dusaniwsky, managing director of predictive analytics at S3.

Beyond Meat shares are on track to reach their highest level since December, putting the stock in positive territory year to date after three consecutive years of losses. The stock’s jump comes after the plant-based protein company’s fourth quarter earnings report, which showed better-than-expected sales and touted a path to profitability in 2024.

Read more: Beyond Meat Soars More Than 100% On Strong International Sales

Still, bears aren’t confident that results alone will be enough to carry the upward price action seen in the stock.

“There was nothing encouraging in the BYND quarter,” said Howard Penney, managing director of Hedgeye Risk Management. He reiterated that the firm has a short recommendation on shares and sees “very little future for the company.”

Wall Street analysts seem to agree. Beyond Meat has no buy ratings, seven holds and nine sells, according to data compiled by Bloomberg. The average price target of $7.33 implies about 31% downside from where shares currently trade.

(Updates stock moves after market open.)