CNBC’s Jim Cramer is asking, “Where’s The Beef?” when it comes to the potential of millions of unlocked shares for Beyond Meat (BYND). In pointing out how the market knows BYND is overvalued, he provides a key example for why unlocking these shares won’t help the sinking stock.
As Cramer says, it’s time to run away from BYND stock. Since the announcement of a secondary stock offering, things have taken a turn. Trading at $220 at the end of July, it has since lost more than half of its value.
“Beyond Meat never should have been that high in the first place,” Cramer states.
The stock peaked when it reported a strong quarter. It was also premature to announce a $3.2 million shares secondary. Pricing the secondary $60 below where the stock had been trading at $160 wasn’t a good way to deal with this either. It may have allowed for a brief winning period; however things kept going lower.
Part of that stock collapse could be credited to the multiple competitors with deeper pockets working on their own plant-based meat. However, Cramer believes the additional shares broke the tightness of what would have been a vicious short squeeze, which drove the rise from $45 to $239 in just a couple of months.
The GoPro Connection
As Cramer reveals by digging through some Beyond Meat on a plate, it reminds him a lot of GoPro (GPRO). After going public in 2014, the IPO price of $24 made it one of the hottest deals of the era, only to soar to $90 about four months later due to a major short squeeze. Similar to BYND, no shares of GoPro could be located to sell short before it happened, and that’s what causes a dramatic ramp up.
At the same time, just like BYND, the underwriters allowed the lock up on insider sales to expire earlier so that the founders could sell nearly six million shares to a new foundation, and the stock never recovered. GoPro eventually bounced back a bit but eventually found itself trading in the single digits.
“I think we’re seeing the exact same thing with Beyond Meat. It’s really happening,” Cramer is sure to note, after detailing how he predicted the same during the sudden rise of the body camera company.
Speaking to what everyone should take away from this story, Cramer states, “What matters in these situations isn’t the fundamentals. If the numbers matter, these stocks never would have gone that high in the first place. No, it wasn’t until the new supply hit the market, then that’s when they peaked. That’s what made the difference.”
Additionally, Cramer is sure Beyond Meat can go lower. Next week, 48 million shares get unlocked, 80% of the share count. Once again, using GoPro as an example, BYND isn’t likely going to be still worth as much as it is, given the position they are currently in. The stock will only get shorted and be knocked lower.
Watch Jim Cramer Mess With His Beyond Meat And Explain:
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