Short Sellers May Be Piling Into Beyond Meat

Jun. 10, 2019 1:18 PM ETBeyond Meat, Inc. (BYND)TSLA72 Comments


  • The borrow rate for Beyond Meat is astronomically high.
  • The technical chart is suggesting the stock is tiring.
  • The valuation makes Tesla look cheap.
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Beyond Meat's (NASDAQ:BYND) stock has soared since coming public just a few weeks ago. But the short sellers appear to be piling into the stock based on the cost to borrow the shares to go short. The technical chart suggests that the stock is overbought and is likely to pull back.

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The cost to borrow shares of Beyond Meat has soared to astronomical levels over the past several weeks. According to data from Trade Alert, on June 10, the cost to borrow the stock was 184% on an annualized basis. It means that someone borrowing the stock and holding that position for the full year would pay more than the stock could fall. It would suggest that anyone shorting the stock at its current valuation has an extremely high level of conviction about the stock falling in the future.

Valuation Is Insane

One reason why short sellers may be piling into the stock is the company's valuation. As of June 7, the stock has a valuation of around $10 billion and is trading at 32 times its next 12 months sales estimates, based on data from Koyfin. That's an insanely high valuation. For comparison, even Tesla (TSLA) at its peak, never traded at more than 8 times its next 12-month sales estimates. Tesla has been one of the most contentious bull/bear stories over the past five years, where valuation has always been the key sticking point.

Dilution Coming

But another reason why traders may be betting against the stock is due to the number of shares that will become available after the lock-up period expires. That period

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This article was written by

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I am Michael Kramer, the founder of Mott Capital Management and creator of Reading The Markets, an SA Marketplace service. I focus on long-only macro themes and trends, look for long-term thematic growth investments, and use options data to find unusual activity.

I use my over 25 years of experience as a buy-side trader, analyst, and portfolio manager, to explain the twists and turns of the stock market and where it may be heading next. Additionally, I use data from top vendors to formulate my analysis, including sell-side analyst estimates and research, newsfeeds, in-depth options data, and gamma levels. 

Disclosure: I am/we are long TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.

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