Short sellers pile on Beyond Meat stock

James Nason, 20/01/2022

A prominent manufacturer of imitation meat has become one of the most shorted companies on the US stock market.

Beyond meat mince and sausages are displayed along with real beef in a New York supermarket. Picture: Dr Ross Ainsworth.

The development comes as investors fret over weaker sales and scepticism grows over the plant-based meat boom, the Financial Times reports.

Beyond Meat reported lower than expected third-quarter sales and slashed revenue guidance for the fourth.

42 percent of the Beyond Meat float is now sold short*, according to the FT, meaning a significant percentage of investors are betting on the stock to fall.

Jim Chanos of Kynikos Associates, one of the world’s best-known short sellers, holds a bearish position on Beyond Meat and told the media the plant-based meat producer had ceased to be a growth company.

“Beyond Meat still trades at 10 times revenues. This is a company that’s still priced for perfection here. The market trades at 2.5 times revenues, and successful consumer companies trade at around 4 times revenues,” he said, as quoted in the FT.

Beyond Meat is trading around $65 per share, less than half of what it was in mid-2021.

Investment guidance website The Motley Fool said that while Beyond Meat management has offered a number of reasons for slowing revenue growth, including the delta variant and labour shortages, its take was that it “appears that there’s an element of faddishness to plant-based meat”.

“When sales were spiking just a couple of years ago, a number of customers may have tried the product once or twice but did not become regular customers.”

The weight of bets against Beyond Meat stock had meant that the shares have failed to react to various “good news” announcements from the company, including US and European executive hirings from the food industry and KFC’s launch of Beyond Meat’s plant-based “chicken” nuggets in the US, the FT noted.

“The ballooning bets against Beyond Meat come amid rising uncertainty about the growth in plant-based meat. Data from the US and UK show that sales, which soared in 2020, flattened out in 2021, albeit against tougher comparable numbers. Although US retailers’ sales of plant-based meat grew 1.6 per cent in December, numbers fell between March and November, taking total revenues for the year down 0.5 per cent, according to US retail data group SPINS.”

Enthusiastic investment into alternative proteins and plant-based foods continues, nevertheless, and new products are being introduced in fast-food chains and supermarkets, the FT article added.

Beyond Meat shares received a brief boost last month on reports of a US nationwide launch of its McPlant burger by McDonald’s, which has already launched in the UK and parts of Europe.

Some analysts are expecting “Veganuary”, a movement that started in the UK to eat a vegan diet after the excesses of the December festive season, to give plant-based meat sales an uplift.

* The practise of short-selling is described as selling a stock, in the expectation that it is going to decrease in value.  Short sellers are wagering that the stock they are selling will drop in price. If the stock does drop after selling, the short seller may buy it back at a lower price and returns it to the lender. The difference between the sell price and the buy price is the short seller’s profit.


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