How Beyond Meat Could Already Be Subject To Shorting Pressure

Beyond Meat BYND traded higher by another 3 percent Monday and is now up roughly 175 percent from its $25 IPO price last week.

This week will offer Beyond Meat short sellers their first chance to take the other side of the trade and make bets that investors’ appetite for Beyond Meat shares won’t last.

What To Know

It takes three business days for trades to settle, so the first wave of open market buyers on May 2 were free to lend their shares starting Monday. So far, short sellers haven’t pushed the stock lower, but they may be waiting for the red-hot stock to reach a near-term top before taking a position.

“It will interesting to see what happens when options start trading on it,” TD Ameritrade senior trading specialist Shawn Cruz told Benzinga. “When the options start getting listed, I wouldn’t be shocked if traders go out there and use the options market to take a downside speculative position on it just because the valuation is so high.”

IPO stocks first become optionable five trading days after their IPO date. Options traders will first have a crack at Beyond Meat starting on Thursday.

Why It's Important

Cruz said investors seem extremely enthusiastic about Beyond Meat given the stock’s high initial valuation. The stock’s early price-to-sales ratio is about 40, about 20 times higher than the average price-to-sales ratio of 2 among food producers.

Short sellers certainly didn’t take time to pile into popular 2019 IPO Lyft, Inc. LYFT last month. Within a week of the stock’s debut, short sellers had already borrowed $455 million worth of Lyft shares to bet against the stock.

Traders will get an early sense this week of whether or not Beyond Meat will suffer the same fate as Lyft after both stocks got off to a strong initial start in the public market.

Related Links:

The Market Was Hungry For Beyond Meat's IPO

It Didn't Take Long For Short Sellers To Pile Into Lyft

Photo courtesy of Beyond Meat.