Two months ago, in mid-May, we warned intrepid contrarians against shorting the latest cult "story" stock, Beyond Meat - which on May 1 completed the strongest IPO since the 2008 financial crisis - for two reasons: some 43% of Beyond Meat's float was sold short, making BYND one of the top 20 most-shorted U.S. companies, and the borrow fee was approaching triple digits, meaning one would have to double their money, i.e. the stock would have to drop to zero, in a year just to break even.
Well, since then what we back then dubbed a "beyond Volkswagen short squeeze" has only gotten worse, and today the stocks has exploded higher once again, rising 8%, and is now an absolutely mind-blowing 775% higher from its IPO offering price of $25:
Sadly, for those shorts hoping that the relentless squeeze higher may soon be ending we have bad news. Not only has deluge of shorts not eased, but according to the latest data, there were 5.5 million shorts, which is a record 47% of the stock float, making it one of the 10 most shorted companies in the US stock market!
And the even greater paradox is that the higher the stock rises, the more investors want to short it, resulting in a borrow fee which at last check was over 144%, more than double the next most shorted stock, Overstock, whose borrow fee is "only" 65.1%. This means that not only does one have to be ready to suffer continued margin pain as the stock keeps rising, but anyone putting a BYND short on now has to be confident the stock will drop to 0 in less than a year to avoid a theta bleed to death.
And while BYND is not Volkswagen quite yet, it only has to go up 4x from here to hit $1,000.
Considering that fundamentals clearly are irrelevant here - at a market cap of $13.2 billion, BYND is trading at 150x LTM revenues - there is no telling how much higher a forced squeeze can take this stock. Add a few cultists who believe Bernstein analyst Alexia Howard, who said that sales could hit $2 billion over the next decade (from $88 million currently) if it increases its share in the alternative meat market to 5% from 2% today, and it is certainly possible that round after round of shorts will continue to get cremated, as they hope to perfectly time the top and short this name back to its fair value about 100% lower.
Which incidentally reminds us of a simple trading rule we first presented back in 2013: the easiest way to generate alpha in this market - where nothing has made sense for the past decade - is just to go long the most shorted stocks; to be sure, BYND has been a phenomenal case study of precisely this. For those who think BYND has run too far, just create an equal-weighted long basket of the remaining 29 stock listed above, and sit back as the alpha trickles in, in this market made by idiots for idiots.