With shares in Beyond Meat (BYND), a U.S. plant-based alternative meat producer that Korean retail investors trading U.S. stocks have net bought more than 200 billion won of in the past week, surging and plunging, most investors have entered unrealized-loss territory. If Beyond Meat shares fail to rebound in the short term, it is expected to remain as a case highlighting the risks of "meme stocks."
According to the Korea Securities Depository (KSD) on the 27th, domestic investors settled net purchases of $178.69 million (about 250 billion won) of Beyond Meat shares over the past week (Oct. 18–24). It was the ninth largest by net purchase settlements among U.S. stocks during the same period.
Given Beyond Meat's current market capitalization of $869 million (about 1.24 trillion won), domestic investors increased their equity stake by around 20% in just one week.
Korean individual investors in U.S. markets bought Beyond Meat in large quantities because the stock emerged as a meme stock. A meme stock refers to a stock that gains popularity among individual investors through word of mouth on social media and online communities.
Beyond Meat was added to a meme stock exchange-traded fund (ETF), and reports that an individual investor living in Dubai made a large-scale purchase began to circulate, sending the share price soaring. The investors also gave it the nickname "soy meat" and started buying.
Beyond Meat shares jumped more than sevenfold from a "penny stock" at $0.52 on the 16th to as high as $3.86 intraday on the 21st. The influx of investors even triggered a short squeeze. A short squeeze refers to a phenomenon in which investors who shorted the stock expecting a decline buy shares to cover losses when the price rises contrary to expectations, pushing the price up further in the process.
But the party did not last long. Beyond Meat shares fell for three straight sessions thereafter, closing the regular session at $2.19 on the 24th. In the after-hours market, they slipped to as low as $2.02.
As a result, Korean retail investors investing overseas who invested near the peak have largely entered unrealized-loss territory. The average return for 11,653 Beyond Meat investors linked to Naver Pay's My Asset service is -83.1%. More than 95% of investors are in the red.
Beyond Meat became the first plant-based alternative meat corporations to list on the New York Stock Exchange in 2019. Riding the wave of vegetarianism and the alternative meat boom, it at one point grew into a corporations with a market capitalization exceeding 10 trillion won. Notable figures such as Microsoft co-founder Bill Gates and actor Leonardo DiCaprio also directly invested in Beyond Meat.
However, the higher price of alternative meat compared with beef acted as a major obstacle to mass adoption. As it became known that numerous chemical additives are used to mimic the taste of meat, the company's position weakened further.
In this situation, the company's weak financial structure also weighed on the share price. To repay debts exceeding 1 trillion won, Beyond Meat decided to exchange existing bonds for new bonds and shares, a process that will increase the share count by more than fivefold. As the number of shares increases, the value per share is diluted.
The earnings outlook is not optimistic either. Beyond Meat's revenue peaked in the second quarter of last year (April–June) and has been trending downward. The size of the losses is not shrinking. The preliminary third-quarter results earlier matched market expectations but did not lead to a rebound in profitability.
Beyond Meat plans to hold a conference call along with the final earnings release for the third quarter of this year (July–September) on Nov. 4. As Beyond Meat recently decided to pick up the pace again in product sales with Walmart, the share-price trend is expected to depend on whether it presents measures for a business turnaround.