Beyond meat‘s (NASDAQ:BYND) incredible winning streak continued on Wednesday, as the stock opened at US$6.16, up 70% from yesterday’s close. After bottoming last Thursday, the stock is up more than 1,000% in less than a week, making Beyond Meat the latest meme stock to “go to the moon,” as its backers like to say.
The rally was sparked by an offer last week for Beyond Meat’s $1.1 billion convertible debt. That created 316.2 million new shares, increasing the number of shares outstanding almost fivefold.
The news was initially poorly received, as massive dilutions are generally bad for shareholders, and shares fell for most of last week. However, the debt conversion removed a significant financial obstacle for the company. At $1.1 billion, that debt, which matured in 2027, exceeded the company’s total assets of less than $700 million at the end of the second quarter, meaning Beyond Meat would not have been able to pay it back.
The move also significantly increased liquidity, allowing a wave of new meme traders to pile into the stock. The stock’s high short interest (54% of shares were sold short at the end of September) helped stimulate collective buying.
Can Beyond Meat Continue to Rise?
At this point, Beyond Meat’s rise is completely unrelated to fundamentals, and there’s no reason why the stock can’t keep rising if traders keep pumping it up. It seems to benefit from a gamma squeeze. Because demand for call options is so high, market makers have to buy the stock to offset the risk of selling those options.
The stock will peak at some point, but that process could play out over the next few sessions if there is interest from traders. Trading volume has soared, with 2 billion shares changing hands yesterday and more than 800 million shares traded by 10:30 a.m. ET this morning.
Investors should keep in mind that even as shares rise, the company still looks fundamentally broken. Beyond Meat’s sales are declining and the company is still significantly unprofitable. This combination usually ultimately leads to bankruptcy.
It’s also hard to imagine an external catalyst that would change Beyond Meat’s fortunes. Plant-based meat is not new at the moment. The potential customers have tried the product, and many of them have decided not to continue purchasing it.
Beyond Meat has announced expanded availability at Walmart (NYSE: WMT) yesterday, but it’s unlikely to save the company in the long run. While the short squeeze could continue, long-term investors should stay away from this broken business.
#Meat #stock #week #counting #rumors #short #print #moon