Beyond Meat Inc (BYND) reported 1st Quarter increased revenues of $40.2 million, an increase of 215% year on year as well as projecting full year revenues of $210 million. With sales and retail demand growing at breakneck speed Beyond Meat has increased its manufacturing capacity in hopes of meeting the additional demand. The plant based protein food producer believes it will become â€śbreak evenâ€ť on an EBITDA basis for the year.
BYND short interest is $814 million with 5.87 million shares shorted, 51.44% of its float. Shares shorted have been relatively unchanged for two and a half weeks as stock loan supply on the street has been virtually swept clean. Stock borrow costs on existing shorts have been up over the 100% fee level since late last week and are trading at 134% fee today. There have been slivers of stock borrows taken down today at 300% fee to 700% fee, making BYND the most expensive active borrow on the street. With short demand still strong, supply not growing and stock recalls beginning to hit the street we expect rates on existing shorts to continue their march upwards, and soar past the 150% fee level by the end of the week.
In less than a month and a half BYND has become the sixth largest short in the Domestic Packaged Food & Meats Sector and the least profitable short trade in the sector. BYND short sellers are down $176 million in mark-to-market losses today as BYND continued its rally, up over 21% on the day. Shorts are now down $574 million in year-to-date loses, down 58% on the year. With stock borrow rates getting more expensive, short sellers are paying just over $3 million per day in financing costs just to keep their short positions on.
There are three types of equity short squeezes: a technical stock loan squeeze where stock recalls force short sellers to shut down their positions and return stock borrows to their lenders; a financing rate squeeze when the cost of financing the short trade takes such a large bite out of expected Alpha that the trade is no longer profitable; and finally, a price stock squeeze when the shorted stockâ€™s price increases so much the at the mark-to-market losses force the short seller to admit defeat and buy to cover. BYND has hit the short squeeze trifecta with several hundred thousand shares of recalls hitting the street; stock borrow rates solidly in the triple digits and its stock price rallying 69% in just two days.
If shorts donâ€™t begin covering their positions soon, we can assume that BYND is becoming Tesla-esque where being a long shareholder is more than an investing decision but also a lifestyle decision, while being a short seller is a more of a test of conviction and principle rather than just short-term gains. Near-term news may benefit the long shareholder as product demand, revenues and production capacity continues to grow especially if a Beyond Meat\McDonalds partnership comes to fruition in order to battle the Impossible Meats\Burger King tandem. Beyond Meats has become more than a vegan\vegetarian product with even die-hard carnivores, like myself, becoming casual customers.
There is a very good chance that there will be a BYND short squeeze in the very near future unless we are seeing the second coming of the teflon Tesla shorts and short sellers sit tight and grin and bear their recent losses. With no additional or impactful short side activity possible, BYNDâ€™s stock price should continue its upward trajectory with very little opposition. Until long buyers lose their stamina and start cashing out their mark-to-market profits, there is no reason for BYNDâ€™s stock chart not to continue its upward trend. BYNDâ€™s stock price may look like itâ€™s overbought, but unless long shareholders stick a pin in their own balloon BYNDâ€™s stock price should keep climbing.
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Managing Director Predictive Analytics, S3 Partners, LLC
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