Beyond Meat insiders will finally be able to cash in their shares next week. Here's why that could spur vicious selling and dent the stock's 340% post-IPO surge.
- Beyond Meat's post-initial public offering share lockup period expires on October 29.
- On that date, 48 million shares - or 80% of the company's outstanding units - will become eligible to be bought and sold.
- It could lead to a sell-off as early investors look to cash in on the stock's nearly 350% surge since the IPO in early May.
- Watch Beyond Meat trade live on Markets Insider.
Mark your calendars. Beyond Meat, one of the strongest performing initial public offerings of the year, will end its lockup period on Tuesday, October 29.On that day, a chunk of roughly 48 million shares - or about 80% of the company's shares outstanding - will become eligible to trade freely on the public market. And if shareholders elect to cash in on Beyond Meat's nearly 350% price surge since going public, it could spur a sharp sell-off.Advertisement
"Given the dramatic appreciation since the IPO, we expect many insiders and private equity funds to cash out, putting further downward pressure on the stock," wrote Arun Sundaram of CFRA in a note Monday.
Such a sell-off would be a boon for short sellers, which have amassed a $672 million wager against the company, according to the financial-analytics provider S3 Partners. Any sort of sharp decline would lead to some long-awaited gains, considering the stock's steep upward trajectory.The lockup expiry will also mean there will be more shares available for short sellers to borrow, thereby lowering borrowing costs, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, told Markets Insider in an email. Since Beyond's IPO, shorts have paid $423 million to borrow, and 75% of their losses to date can be attributed to those prohibitively high costs, S3 says.
The lockup expiry won't be the first time the market has seen additional shares of Beyond Meat hit the market. In July, the company announced after its second quarter earnings release that it was selling an additional 3.25 million shares in a secondary public offering, which gave early investors an opportunity to cash out post-IPO gains of nearly 800%.Advertisement