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Key takeaways
- The debt swap deal left Beyond Meat shares dead — before the meme stock crowd moved on.
- Stocks jumped on Monday, the latest sign some traders are taking risks even as caution grows in other pockets of Wall Street.
Whatever investors’ appetite for meat alternatives, many of them have a strong appetite for risk. Beyond Meat (BYND) stock shows that.
Retail investors are flocking to the name, trying to revive the plant-based burger and sausage maker’s stock as a meme. Trading volumes in its stocks and options began rising last week, and are now at double their 30-day averages, according to Yahoo Finance. Shares of Beyond recently traded for just under $1, rising more than 50% on Monday to reverse much of last week’s decline. (At its post-IPO highs, it traded above $200 apiece.)
The penchant for high-risk/high-reward trades has made a comeback among retail investors even as others turn cautious. A research report released by Deutsche Bank last week said that “momentum chasing trading” has become less popular with some of its clients. But those mobilizing resources and deploying stock have recently used the beleaguered company as their darling again.
“Today’s reversal and rising short interest will put it back on traders’ radars,” said Tom Bruni, head of markets and retail investor insights at investment-focused social media platform StockTwits.
Why is this important to investors?
Fears of stretched valuations and geopolitical uncertainty are prompting some investors to pull back from riskier bets. But pockets of the retail group are still eager to jump into the meme stock move, showing that risk appetite has not gone away yet.
Beyond was sent “to the moon” along with Opendoor (OPEN), Krispy Kreme (DNUT) and GoPro (GPRO) during the summer meme stock revival. Another opportunity to raise stock prices came last week, just as the company appeared to have hit rock bottom.
The once-fashionable company, which has been suffering from falling demand for its food products, has resorted to a debt swap deal that could result in the issuance of up to 326 million shares of its common stock on top of the 76.1 million shares already outstanding, indicating the potential for massive dilution. This helped reduce the stock by more than half, leading to continued declines from the beginning of the year until now. This was around the time a thread called “MAKE $BYND GREAT AGAIN” appeared on a Reddit forum called “shortsqueeze.”
While Wall Street has formalized the definition of blue-chip or deep value stocks, meme stocks are harder to define. They tend to be companies with a low number of tradable shares, making them vulnerable to high volatility, high short interest rates, and an opportunity for retail trading to outperform the pros. Many of them, like Beyond, have user-friendly names that might resonate with everyday people.
However, there may be a shortage of ringmaster. Eric Jackson, who works at OpenDoor as Keith “Roaring Kitty” Gill, who used to work at GameStop (GME) and AMC (AMC), said he’s been inundated with requests to take a position in the stock.
“Is this a bot campaign?” He posted on social media over the weekend.
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