Bets against Beyond Meat Inc. (BYND) have cost investors US$398 million as of Friday’s close, according to research from S3 Partners.
The company’s NASDAQ-listed stock surged 21.24 per cent to an all-time closing high of $168.10 on Monday, following a blistering 39 per cent ascent on Friday.
Shares of the California-based maker of plant-based meat alternatives debuted at $25 on May 1.
Short interest stands at $814 million or 5.87 million shares shorted, according to New York-based S3, representing more than half of Beyond Meat’s float.
Ihor Dusaniwsky, managing director at S3, is calling for a short squeeze in the “very near future,” where short sellers buy the company’s stock to prevent further losses.
“BYND has hit the short squeeze trifecta with several hundred thousand shares of recalls hitting the street; stock borrow rates solidly in the triple digits and its stock price rallying 69 per cent in just two days,” Dusaniwsky wrote in a report late Monday.
He describes a “Teslaesque” situation if short sellers don’t begin covering their positions soon, where long shareholders are making a “lifestyle decision,” rather than just an investment call through their ownership.
The bears, he said, could represent “more of a test of conviction and principle” than a hunt for immediate profit.
S3 predicts betting against Beyond Meat could become an even more expensive proposition, suggesting the stock-borrow fee could rise to 150 per cent by the end of the week, from the 134 per cent reached in Monday’s session.
Dusaniwsky said near-term news may benefit long shareholders as product demand, revenues and production capacity continues to grow, especially if a Beyond Meat\McDonalds partnership comes to fruition in order to battle the Impossible Meats\Burger King tandem.
“With no additional or impactful short side activity possible, BYND’s stock price should continue its upward trajectory with very little opposition,” he wrote. “Until long buyers lose their stamina and start cashing out their mark-to-market profits, there is no reason for BYND’s stock chart not to continue its upward trend.”
Shares fell 13 per cent to $146.24 in the pre-market at 8:47 a.m. ET on Tuesday.