Market Overview

Beyond Meat Shorts Take Another $100M Hit On Dunkin' Partnership

Beyond Meat Shorts Take Another $100M Hit On Dunkin' Partnership

Beyond Meat Inc (NASDAQ: BYND) has been one of the hottest IPOs in recent memory, with shares surging more than 800% from a $25 IPO price in less than three months.

Earlier this week, Beyond Meat announced a new partnership with Dunkin Brands Group Inc (NASDAQ: DNKN) to supply plant-based meat alternative for its new Beyond Sausage Breakfast Sandwich. The stock has climbed another 27% this week alone.

Short sellers have piled into Beyond Meat since its IPO, and investor sentiment remains extremely bearish. According to financial analytics firm S3 Partners, Beyond Meat short sellers endured more than $100 million in additional losses this week, and the stock has all the ingredients for a massive short squeeze in the near future.

The Numbers

S3 Partners said Beyond Meat already has a nearly $1.1 billion outstanding short position, one of the largest in the entire packaged foods and meats group. As of Thursday’s close, those short sellers have endured nearly $1 billion in collective mark-to-market losses since the company’s IPO in early May.

S3 analyst Ihor Dusaniwsky said short sellers flooded into Beyond Meat as soon as it hit the market, quickly using up almost all available shares to borrow. Dusaniwsky said borrow rates have consistently been above 100% since June. This week, that rate climbed to roughly 132%.

As Beyond Meat’s share price continues to rise, Dusaniwsky said both longs and shorts are “becoming more cultish” and digging in their heels, a similar dynamic to what he’s seen with Tesla Inc (NASDAQ: TSLA).

Short Squeeze Ahead?

Beyond Meat’s short percent of float is now 46.2%. None of the other 10 largest shorts in the packaged foods & meat group have short percents of float above 15%. Dusaniwsky said Beyond Meat short sellers have already collectively paid $164 million in financing costs alone.

As losses continue to mount, Dusaniwsky said short sellers are now facing a new challenge--stock recalls.

“While Prime Brokers have been working furiously to protect their clients form the bulk of the recalls, there are very few rocks to look under for replacement stock borrows and short sellers will feel the full brunt of the new recalls over the next few weeks,” Dusaniwsky wrote.

“If BYND’s stock price continues to soar, stock borrow rates continue to increase, and recalls keep hitting the street we will see an epic BYND short squeeze in the very near future.”

Short sellers that are able to maintain their positions are hoping Beyond Meat’s market valuation eventually falls more in-line with the company’s fundamentals. Of the seven Wall Street analysts covering the stock, the highest 12-month price target is $125, roughly 46% below Beyond Meat’s current share price, according to CNN.

The stock traded around $232.83 per share at time of publication.

Related Links:

Tesla Short Sellers Bank $1.5B On Earnings Miss

Quint Tatro Calls Beyond Meat's Valuation 'Beyond Ridiculous'

Latest Ratings for BYND

May 2020BTIGInitiates Coverage OnBuy
May 2020JP MorganMaintainsNeutral
May 2020DA DavidsonMaintainsNeutral

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