Demand for Beyond Meat’s plant-based burgers may be wavering, but investor interest in the company’s stock has surged dramatically.
Shares have skyrocketed approximately 1,000% in just four trading days, marking a remarkable rally for a company whose share price had significantly declined since its initial public offering six years prior.
The company has faced challenges with declining sales and has not reported a quarterly profit in over five years, as consumers increasingly opt for alternatives to its meat substitutes.
This sudden surge has reignited discussions about whether such activity, fueled in part by online enthusiasm among retail investors, is indicative of an excessively exuberant stock market.
The momentum began last week, with a Reddit user helping to spark a wave of buying, drawing parallels to previous rallies of so-called meme stocks like GameStop and AMC.
The gains continued after Roundhill Investments added Beyond Meat to its meme stock ETF, or exchange-traded fund, on Monday. This move appeared to trigger a short squeeze, forcing investors who had bet against the company to buy shares to cover their positions as the stock price rose sharply.
Furthermore, the announcement of a distribution agreement with Walmart on Tuesday provided an additional boost to the company’s shares.
“This company was essentially considered to be on the verge of going out of business not that long ago,” noted Mark Hackett, chief market strategist at Nationwide.
He added that “getting a positive catalyst like the Walmart deal, which could be transformational with the rebound of demand and getting products in the hands of consumers – that is absolutely the trigger” for the recent surge.
However, Mr. Hackett cautioned that the Walmart distribution deal “doesn’t necessarily fix all the issues”.
“You’re really trading on emotions and technicals, versus fundamentals,” Mr. Hackett stated.
The company’s position remains precarious. As of Wednesday afternoon trading in New York, its share price, at just over $4, remains significantly below its all-time high of over $230 in 2019.
The Beyond Meat meme stock surge occurs against a backdrop of anxieties regarding a potentially overvalued stock market.
Key concerns center on a possible bubble forming in the artificial intelligence (AI) sector, intensified by analysts’ difficulties in assessing the financial rationale behind the substantial investments made by major players.
JP Morgan Chase CEO Jamie Dimon expressed similar concerns earlier this month, telling the BBC that he was “far more worried than others” about a significant market correction, potentially within the next six months to two years.
The Securities and Exchange Commission has also highlighted the potential for market manipulation related to meme stocks, emphasizing the risks to retail investors.
Some have advocated for stricter regulations surrounding short selling and social media-driven trading, but such proposals have yet to gain substantial momentum.
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