I received the following spam:
Instantly I thought… the hype is dropping off like what happened to the Beanie Babies – I’m guessing that consumer retail demand is probably starting to wane. Beyond Meat (Nasdaq: BYND)’s IPO lockup expires at the beginning of November and this is when another flood of shares will presumably hit the markets.
Beyond is trading at $148/share presently, or a market cap of $9 billion. This is a lot higher than it actually should be.
Unfortunately this revelation is not unique as there is a very large lineup of people that want to short this thing.
Even assuming I can get a borrow, if I were to short 100 shares of BYND at current market prices, I’d have to pay $88/day in interest expenses (another way of thinking about this – 88 cents per share per day!) in order to maintain the short!
Conversely if you believe for whatever reason this thing isn’t going down, you stand to make a fortune on raking in the borrow fees on the stock if you use the right broker.
What about options?
Using December as an example, a call option near-the-money (strike 145) is $8 at the midpoint, while a put option at the same strike is $31.40!
Even deeper in the money (e.g. strike price of $175) your break-even, even if you get a mid-point execution is $116/share, or basically paying a 22% premium to short the stock.
Even paying a spread (e.g. making a bet that BYND will be lower than $120/share by December expiration) by buying the 150 put and selling the 120, your effectively are paying $21.15 (again, assuming mid-point option trades) for a maximum $8.85 profit IF the stock goes to $120 or below in a few months.
This is one beyond expensive short sale!