Beyond Meat’s stock is soaring due to a combination of hype surrounding the trendy company and a short-squeeze leaving bears holding the bag. | Source: Shutterstock
Why is Beyond Meat’s stock going bonkers, and is the company’s valuation fair at this price?
There are two reasons behind this insane move.
A Lot of Hype
The stock market is presently at its third most expensive ever. When the stock market gets this frothy, IPOs and other speculative investments tend to attract a lot of hype and momentum investors.
These investors piled into Beyond Meat’s stock when the IPO started trading. The stock market saw Beyond Meat’s stock thus open at $46 per share, almost double its IPO price.
That made Beyond Meat the big story of the day, juicing investors to bid the stock higher and higher. Often, a stock bid up like that will often decline the next day. When they don’t, they tend to keep running; Beyond Meat did exactly that.
Hype and momentum will only carry stocks so far. When that is combined with a low number of shares trading, however, it’s a recipe for rocket fuel.
Beyond Meat issued about 9.6 million shares. That’s not a lot, although it is still relatively low compared to most stocks.
In fact, 9.6 million shares would be enough to sustain a fairly strong move higher in any stock market, but buyers created a short squeeze that blew the top off BYND.