'Beyond Meat' Sends Korean Investors Reeling: Why Shares Soared Sevenfold, Then Plunged [Company & Issue]

Repeated Surges and Plunges as Meme Stock
Business Expansion Backed by Celebrity Investors
Securing Sales and Financial Stability Remains a Challenge

Beyond Meat Homepage

Beyond Meat, a US-based alternative meat company, has recently become a hot topic on the Nasdaq market due to extreme stock price volatility. The share price soared more than sevenfold in a short period, only to be cut in half again, resulting in significant losses for numerous investors. Experts have warned that although expectations for positive developments such as debt reduction have driven Beyond Meat's stock price higher, the price could decline further if the company fails to resolve issues of declining sales due to a shrinking alternative meat market and ongoing concerns about financial stability.

Stock Soars 700%, Then Plummets Again... Beyond Meat's Rollercoaster Ride

Beyond Meat's stock price experienced significant fluctuations on the Nasdaq market last month. At the beginning of October, the stock was priced at $2.31, but by October 16, it had plunged to $0.52-a quarter of its initial value. Then, on October 21, it skyrocketed to $3.62, a surge of over 700%, before tumbling again by 54.4% to $1.65 on October 30. This truly exemplified a rollercoaster market trend.

The key driver behind Beyond Meat's extreme volatility was its debt issues. The stock price plummeted as bankruptcy concerns grew due to deteriorating finances but rebounded after the company announced a debt restructuring on October 13. According to CNBC, Beyond Meat successfully restructured $1.114 billion (about 1.59 trillion won) in convertible bonds maturing in 2027, exchanging them for 316.15 million shares. As a result, the company's total debt was reduced to around $200 million.

Relief over escaping bankruptcy, along with news of a new supply contract with Walmart, fueled a rebound in the stock price. Additionally, US thematic ETF specialist Roundhill Investments included Beyond Meat in its Meme Stock ETF, further raising expectations for a stock price increase. As Beyond Meat gained traction on social media as a promising stock, it attracted heightened attention from investors.

On top of this, speculation about a potential 'short squeeze' by short sellers prompted many investors to buy Beyond Meat shares en masse. A short squeeze refers to a phenomenon where short sellers, who have borrowed and sold shares expecting a price drop, rush to buy back shares to cover their losses as the price rises, causing a temporary spike in the stock price. However, as the rapid short-term surge led to increased price pressure, investors shifted to large-scale selling, causing the stock to fall again.

First Alternative Meat Company Listed on Nasdaq... Business Expansion Backed by Celebrity Investors

Ethan Brown, CEO who founded Beyond Meat. Beyond Meat homepage

Beyond Meat was originally founded in 2009 by Ethan Brown, a vegetarian and animal lover. With the goal of improving animal welfare, he conducted research on plant-based protein alternatives at a research center at the University of Missouri, obtained technology licenses, and established Beyond Meat. In 2019, Beyond Meat became the first alternative meat company to be listed on the Nasdaq.

Beyond Meat's alternative meat products are made by culturing plant-based proteins extracted from soybeans, mushrooms, pumpkins, and other sources, combined with yeast and fiber. In May 2014, it was revealed that Beyond Meat's plant-based chicken salad and regular chicken salad had been mixed and sold at Whole Foods Market, a US organic specialty retailer. The company initiated a recall, but it became famous when reports emerged that consumers could not tell the difference between the two products.

At the time of its Nasdaq listing in 2019, Beyond Meat gained even more attention as public interest in animal welfare and environmental protection increased. High-profile figures such as Bill Gates, founder of Microsoft, and renowned Hollywood actor Leonardo DiCaprio had invested in the company even before its listing, drawing further interest from investors.

Alternative Meat Craze Cools Amid Global Inflation... Financial Stability Remains Uncertain

AP Yonhap News

Experts warn that Beyond Meat's performance has not improved as the global alternative meat craze has cooled due to worldwide inflation, and that financial stability remains shaky, urging investors to exercise caution.

In fact, Beyond Meat has continued to post losses. Last year, the company recorded a net loss of $160.3 million, and by the second quarter of this year, it had accumulated a net loss of $90 million. The BBC pointed out, "Because alternative meat is more expensive than regular meat, buyers are turning away from it in the current inflationary environment," adding, "Given recent performance, the recent short-term surge gives the impression that the stock is significantly overvalued."

Experts note that even if some positive developments temporarily boost the stock price, further declines are possible if the company's performance does not improve. Mark Hackett, Chief Market Strategist at investment firm Nationwide, explained, "Positive developments such as the distribution expansion agreement with Walmart are not enough to solve all the problems," and "the current stock price is being driven more by investor sentiment and technical trading than by fundamental performance and figures."

Jamie Dimon, CEO of JPMorgan Chase, also warned in an interview with the BBC, "I am concerned about the possibility of a serious correction," adding, "There is a chance that such a correction could occur within the next six months to two years."