Retail Traders Sending Beyond Meat 80% Higher Today

Beaten down shares of Beyond Meat (NASDAQ: BYND) are showing big signs of life today.

Up about 80%, or 52 cents, to $1.16, volume on the alternative meat stock surged to 643 million, as compared to its daily average volume of 19.9 million.

All thanks to massive short covering following news the company completed a debt-for-equity swap that changed the share structure announced on October 13. At the time, Beyond Meat issued 316 million new shares to bondholders in exchange for reducing part of its debt burden. This expanded Beyond Meat’s outstanding shares from 76.7 million to more than 392 million.

Investors weren’t happy, seeing the swap as a major blow to shareholder value.

So, they sold, cratering the stock by about 50%.

Shortly after, as the newly issued shares began to trade, the stock began to take off, forcing short sellers to buy back shares, which fueled the short covering pump.

Despite the Excitement, All is Not Well 

The short-covering spree may be exciting for now. But we don’t expect for it to last long.

We also have to consider there’s not a lot to get excited about under Beyond Meat’s hood. In its second quarter, revenue dropped 20% year over year to $75 million, which was short of expectations. It also withdrew its full-year guidance. There’s also the $1.2 billion in debt, and about $117 million in cash on hand.

And unfortunately, the alternative meat sector isn’t so hot.

According to LATimes.com, “The entire U.S. plant-based meat and seafood industry saw a 28% drop in unit sales and an 18% drop in revenue to $1.17 billion over the last two years, according to a report by the Good Food Institute, a nonprofit that advocates for alternative proteins. The downturn also hit markets outside the United States.”

Analysts aren’t confident either.

TD Cowen just lowered its price target on BYND to 80 cents from $2, citing significant shareholder dilution with the latest swap. “According to the research firm, the transaction reduces Beyond Meat’s debt principal by 83% while simultaneously increasing the company’s share count by 413%,” according to Investing.com.

Analysts at Argus downgraded BYND to a sell rating. All thanks to crumbling sales, shrinking market share, and heavy losses.

In short, as exciting as the BYND short-covering rally may appear, things aren’t so hot under the hood. Plus, once the short-covering is over, the stock is likely to slip to less than $1 again, especially with the shareholder dilution.