Analyst: Beyond Meat Set Up For 'Whopper Of A Short Squeeze'

Beyond Meat Inc BYND shares rallied more than 10% Thursday following news that it's partnering with Mcdonald's Corp MCD to supply plant-based meat for a three-month trial of the "P.L.T." — plant, lettuce tomato — in Ontario, Canada. 

Since its IPO earlier this year, Beyond Meat has been one of the biggest targets of short sellers, and they took a beating on the McDonald's news Thursday.

The Numbers

S3 Partners analyst Ihor Dusaniwsky said Thursday morning’s pop in Beyond Meat cost short sellers more than $80 million in mark-to-market losses.

Beyond Meat has $746 million in short interest, representing an extremely high 41.5% of the stock’s float.

What makes the situation most dangerous for Beyond Meat shorts is the fact that there are virtually no shares available to borrow, a dynamic that has driven the stock’s borrow fee on existing short positions up to 141% and fees on new short positions above 300%, according to S3.

Dusaniwsky said Beyond’s borrow fee is by far the highest of any domestic stock, with at least $50 million in short interest. Beyond’s borrow fee on existing short positions is nearly double the 72.3% fee on Zoom Video Communications Inc ZM, the second most expensive stock to short.

Due to the nonexistent supply of Beyond Meat shares to borrow, short sellers are virtually helpless to bet against the rally.

Exorbitant Fees

Existing short sellers are also running out of patience given the high fees.

Regardless of whether the stock trades higher or lower, Beyond short sellers are collectively paying $2.7 million per day in borrowing costs, Dusaniwsky said. 

Looking ahead, the analyst said any indication from McDonald's that it is expanding its limited Canadian trial to its U.S. locations could trigger an explosive wave of short covering.

“If BYND’s stock price continues this upward trajectory, this will turn into a ‘Whopper’ of a short squeeze.” 

Benzinga’s Take

Plenty of analysts have come out in recent months suggesting Beyond Meat’s market valuation is unreasonable in light of its fundamentals.

Yet given the stock’s massive short position and extreme borrow fees, Beyond Meat short sellers are playing an extremely dangerous game in the near-term.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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Photo courtesy of Beyond Meat.