In recent years, meme stocks and meme coins have become an common feature of the public markets. This is largely due to the rise of retail traders and social media. Using forums on Reddit, retail traders can better communicate and coordinate trading around stocks that they believe are short squeeze candidates or simply ones they like and think can go viral.
Dogecoin (DOGE 6.86%) is a cryptocurrency that is considered the original meme coin, and now has become an established part of the crypto landscape. Beyond Meat (BYND 13.29%) is a newcomer to the meme game and has recently seen its stock make some wild moves. Which is the better meme trade?
Image source: Beyond Meat.
Dogecoin is here to stay
Dogecoin launched as a joke in 2013 with a Shiba Inu dog mascot. The coin hung around for several years but really took off in 2020 thanks to the power of virality. Celebrity business leaders and billionaires Mark Cuban and Elon Musk thought the token was funny and allowed consumers to use it to pay for some items at their various businesses. Today, Dogecoin is the ninth-largest cryptocurrency in the world with a market cap of more than $27 billion.
Still, the coin does not have much real-world utility. Dogecoin's blockchain network is not particularly strong from a technical perspective, in that it cannot process many transactions per second. Dogecoin is also not viewed as a strong store of value, given that the cryptocurrency has a circulating supply of more than 151.5 billion tokens, and issues five billion new tokens each year.
But Dogecoin's vibrant community has kept the token relevant, and Dogecoin tends to swing with the broader crypto market. The network could gain more utility over time. MyDoge, which creates a free wallet specifically for Dogecoin holders and has a half-million users, reportedly raised close to $7 million earlier this year for the purpose of building a Layer-2 solution, which will allow users to process Dogecoin transactions off the main network, thereby speeding up transaction times and allowing the network to better scale.
The purpose of the additional layer is to give Dogecoin's network smart-contract functionality, so developers could build decentralized apps and incorporate things like gaming into the Dogecoin ecosystem. Given the network's strong following, these features could prove to be popular and increase demand for Dogecoin.
Beyond Meat: A struggling company that caught fire
Beyond Meat is a $660 million market cap company that creates and sells plant-based meat, from burgers to sausages to chicken. The company went public in 2019 and the stock is down more than 97% since then.
Beyond Meat was a pioneer in the plant-based meat trend, but has struggled in recent years due to high costs that have made products unappealing to consumers during a time when inflation has surged. Furthermore, competition and waning interest in the plant-based meat alternative has led to struggling financial results. In the company's recent quarter, Beyond Meat saw revenue decline by about 20% year over year, while the company is still deep in the red.
NASDAQ: BYND
Key Data Points
In fact, earlier this year, reports circulated that the company might file for Chapter 11 bankruptcy, although Beyond Meat disputed those reports. At the end of the second quarter of the year, the company had more than $1.14 billion of convertible senior notes on its balance sheet.
In early October, in an attempt to reduce its debt load, Beyond Meat executed a debt-swap deal, in which it exchanged its convertible senior notes due in 2027 for about $203 million of new senior convertible notes yielding 7%. This reduced debt by about $800 million. However, as part of the arrangement, Beyond Meat had to issue more than 326 million shares, leading to significant dilution, given the company only had about 76.5 million shares at the end of the second quarter.
These actions attracted significant short selling from investors betting on a share price decline. This short interest, in turn, attracted the retail crowd, who tried to get together to force a short squeeze, in which a rising stock price would force short sellers to buy back the shares they borrowed, which would add fuel and drive up the stock. As you can see below, the shares initially plunged on the debt-swap deal, then surged as retail traders tried to force a short squeeze, and then fell as the lock-up period on the newly issued shares expired and they became available for public trading.
Which is the better meme trade?
Right now, Beyond Meat is certainly the more likely meme trade to make big moves, as it's more relevant and in the limelight. Of course, investors will need to gobble up a lot of new shares to reignite the meme rally behind it. Some of these meme stocks hang around forever once they build up a big enough following, although I think it's too soon to say if Beyond Meat will get there. Dogecoin, on the other hand, has reached this level, and now tends to trade with the broader crypto sector.
Although I don't have any interest in either asset, Beyond Meat likely has more relevance right now and therefore is more likely to get driven up by retail traders. However, Dogecoin likely has longer staying power, given that it's already stood the test of time. If a Layer-2 solution is developed and integrated into the network, this could prove to be a real catalyst for Dogecoin.
