As Beyond Meat (BYND) stock continues its seemingly endless slide, prominent CNBC Mad Money host Jim Cramer is saying “run, don’t walk” away from the company’s shares. Rather than the typically cited influx of new competition, Cramer believes that a lack of liquidity pushed the stock unsustainably higher, fueling its disastrous decline.
Clearly, rising competition is also a significant issue for Beyond Meat as supermarkets stock up on alternative plant-based competitors. BYND’s fall from its $234 peak to trade at $103.80 overnight on Tuesday is clearly about more than that. In fact, Beyond Meat has been able to hold its ground extremely well in the marketplace, securing high profile deals with huge restaurant chains and establishing itself as one of the premier plant-based offerings. None of this looks to matter as analysts now view the price of BYND stock as tremendously overvalued.
Cramer looks spot on with his comparison of BYND with former IPO darling GoPro. A quick look at trading volumes for Beyond Meat’s shares tells you everything you need to know about the liquidity crunch that made it impossible to short the company. A second share offering suddenly gave the bears the ammunition they needed to start attacking BYND. A comparison with bitcoin can also be made. BTC/USD hit its peak shortly before the introduction of futures trading allowed speculators to more easily short the major cryptocurrency.
Alarmingly, speculation is spectacularly light in Beyond Meat stock, as average volumes have collapsed since late July. Buying appetite looks to have evaporated, as bulls don’t appear to be hanging around to see where this bubbly looking stock will stop its decline. The price of BYND fell 13% after its Q2 earnings alongside the announcement of its second share offering, but a more significant event looms before Q3. The “IPO lockup” period ends on Oct. 29, meaning that early investors may now be able to dump their shares and cash in fully on their investments.
This lockup ending is evidently a moment of truth for Beyond Meat’s stock. If Jim Cramer is correct, and this stock is the new GoPro, BYND could keep sliding for weeks or months. Alternatively, short-sellers could be front-running the full release of shares on the 29th as a bearish event, and it might be an opportunity for a short squeeze. It would take a brave investor to wait around to see what happens, and Cramer is sounding the alarm that it might be time to head for the emergency exit.