Beyond Meat‘s borrow fee has climbed to more than 100%, meaning
it’s more expensive to bet against the stock than to own
- Still, short sellers are not leaving the trade despite
losing $568 million this year, according to Ihor Dusaniwsky of the
data-analytics firm S3 Partners.
- It is rare for stocks to have borrow fees of more than
100% for more than a few days.
Watch Beyond Meat trade live.
Not everyone is happy with
Beyond Meat‘s soaring stock price.
Short-sellers, or traders who have bet against the
best-performing initial public offering of the year, have lost
hundreds of millions of dollars as the stock has climbed
to more than 600% of its initial IPO price of $25 a share.
On Monday, the fee to borrow shares of Beyond Meat surged to
134% for existing shorts, meaning that it is more expensive to
short the stock than to go long, according to Ihor Dusaniwsky, the
managing director of predictive analytics at the data-analytics
firm S3 Partners. In
addition, the scarcity of stock is now causing new shorts to pay
premiums of 300% to 700% in borrow fees to enter the trade.
“It’s extraordinarily rare,” to have a short borrow fee over
100% for such a long time, Dusaniwsky said. The borrow fee edged
over 100% on June 6, and has been going up ever since.
Monday’s 21% surge meant short-sellers were saddled with $170
million in mark-to-market losses on Monday alone, bringing their
total loss since the May 2 IPO to $568 million, according to
Dusaniwsky’s calculations. Shorts are paying $3 million a day just
in financing costs, meaning they’ll soon have to decide if the cost
of financing the trade will be worth it in the long run.
Most short sellers appear to be staying the course for now. Even
amidst positive news such as the
potential of a partnership with McDonald’s and the
better than expected full-year outlook, they are holding onto
their positions, banking that the runaway gains can’t last.
“They’re saying this has been such a hot and heavy move by the
stock that it has to come back,” said Dusaniwsky. “This has gone
from being a normal short to something that’s in its own class.
It’s very Tesla-esque.”
Tesla short-sellers held positions for years before seeing a big
payoff. But when
Tesla shares tanked in May, they recorded $1 billion in
profits, one of the
highest-paying months for bears since 2016, according to
Shorts might also be holding their position because the stock is
still in its lock-up period, meaning that early investors are
unable to sell.
After the lock-up period is over, it’s assumed that some early
investors will sell shares to realize a profit, which could
pressure the stock. But how much that will impact the share price
is debatable, Dusaniwsky said.
“This is really a one-off name in the market right now for stock
to go this high and for shorts not to move,” Dusaniwsky said. If
there is going to be a short squeeze, he thinks it will happen
While other stocks’ borrow fees have exceeded 100%, few have had
that high of a fee for as long as Beyond Meat — usually borrow
fees spike and then quickly decline. But Beyond Meat’s fee has held
over 100% since June 6 and is still climbing.
“This looks like it’s got some legs, but we’ll see, in a week it
could be a whole different story,” Dusaniwsky said.
Beyond Meat is up 572% since its shares priced on May 1.