Beyond Meat experienced a meme stock rally last month but has since lost the bulk of its gains.
Investors have long indicated they don’t believe the plant-based meat company can escape from an ongoing dilution spiral.
Beyond Meat may stay in business for now, but shares are likely to continue dropping in value.
The past several years have been rough for Beyond Meat (NASDAQ: BYND), but that didn’t stop the plant-based meat company’s shares from becoming one of the top meme stocks last month. In fact, Beyond Meat’s precarious state may be the reason behind last month’s meme mania.
However, flash forward to now, and shares have already retreated considerably. Although the company itself may survive, there could be more pain ahead for investors.
Up until the early 2020s, Beyond Meat was one of the most promising growth stocks. The rising popularity of plant-based diets pointed to further growth ahead. However, starting in 2021, the company’s sales began to decline. This was due to a combination of competition from other alternative meat brands like Impossible Foods, coupled with the plant-based diet lifestyle trend peaking in popularity.
Already unprofitable, declining sales sank Beyond Meat deeper in the red. At first, existing cash covered these losses. Over the past two years, however, the company has had to sell more stock to raise money, leading to share dilution. Together, these factors caused shares to fall over 99% from their all-time high.
Struggling and caught in a dilution spiral, Beyond Meat became a prime target for short-sellers. However, last month, as short interest spiked following the announcement of a highly dilutive debt restructuring plan, meme stock speculators started buying en masse to trigger a short squeeze.
This caused Beyond Meat to rally from around $0.55 per share to as much as $7.69 per share in a matter of days. However, after the company released lackluster preliminary quarterly results on Oct. 24, the “meme mania” quickly gave way to another massive sell-off.
Thanks to the debt restructuring deal, Beyond Meat has staved off bankruptcy for now. However, unless the company quickly executes an effective turnaround plan, one that prioritizes profitability, the dilution spiral will likely continue. Existing shareholders would be wise to sell the stock; otherwise, stay away.
Before you buy stock in Beyond Meat, consider this:
