Short-sellers, beware! It looks like there may be another GameStop-style squeeze afoot. But this time, it's not a retailer in the hot seat but plant-based burger and sausage maker Beyond Meat (BYND 17.40%).
Can the beaten-down vegan food company continue its massive rally? Could this be the biggest meme stock of the year? More importantly, can it hold on to its 454% gains from the past week? Here's what investors need to know.
Image source: Getty Images.
From meat to meme
Beyond Meat stock has been, frankly, a terrible investment. Over the last five years, it's lost more than 99% of its value. Last week, it looked like shareholders would lose even more when the company announced it would raise money by issuing more than 316 million new shares, roughly four times the amount of existing shares outstanding.
The stock price tumbled below $1 a share, which put the company at risk for delisting. It also caused short interest to soar 30% in the wake of the announcement. But then the rally began that has all the hallmarks of a short squeeze.
NASDAQ: BYND
Key Data Points
On Monday, Roundhill Investments added Beyond Meat to its Roundhill Meme Stock ETF, and the stock price skyrocketed to $1.68 a share, up 132% from Friday's close. By the end of Tuesday's trading, it was at $4.44 a share, up 515% from Friday's close. The squeeze seemed to be working: Short interest had dropped by 13.5%.
On Wednesday, though, Beyond Meat's shares hit a premarket high of $8.55 a share before tumbling to $3.17 a share. That's still up 339% from last week's close, but it could be a sign this meme rally is short-lived, and nowhere close to Opendoor Technologies' 1,200%-plus jump from its July low. That said, many meme rallies, including GameStop's, feature several peaks and valleys as investors jump in and out, trying to maximize gains.
At this point, Beyond Meat's stock price movements have nothing to do with the business's prospects and everything to do with meme stock sentiment. Investors should steer clear until the dust settles.
