Beyond Meat Inc (NASDAQ: BYND) shares tanked another 10% on Thursday after the company priced its recently announced 3.25 million-share secondary offering at $160, more than a 30% discount to the stock’s $234 closing price last week. Despite the market disappointment with the pricing, the $160 price represents more than a 500% premium to Beyond Meat's IPO price of $25.
Trading Above Offering Price
Even after the big sell-off, Beyond shares were still hovering around $177, about 12% percent above the offering price. Typically, stocks initially trade in-line with the offering price in the case of secondary offerings as large as Beyond Meat’s. However, Benzinga PreMarket Prep co-host Dennis Dick said on Thursday's show that traders shouldn’t necessarily expect Beyond Meat to close that gap down to $160.
“Typically these things like to pull down to the secondary pricing. I'm not sure that's going to happen in this case because they are so many factors involved,” Dick said.
On Wednesday, Edison International (NYSE: EIX) had a similar offering priced at $68.50, but the stock traded up to around $75.
“Edison has nothing to do with Beyond Meat, but they both did secondaries and I've never seen a secondary [go up] like that. I'm just saying, Beyond Meat doesn't have to trade down to its offering price. There are so many other mechanics here happening. And that Edison trading from yesterday would scare me if I was flat out shorting [BYND],” Dick said.
While the stock has remained well above the offering price, Dick said the $160 price is telling for Beyond Meat bulls given the steep discount to its recent trading range.
“There was obviously not that much interest to have to price it that low,” he said.
Alternative Uptick Rule
In the near term, Dick said the alternative uptick rule is also helping support Beyond Meat’s share price. The alternative uptick rule forbids short sellers from executing trades at the bid price on any stock that is down 10% in one day through the end of the following trading day. Short sellers must instead short only on the ask price.
Since Beyond Meat shares were already down more than 10% on Wednesday when the offering pricing news was announced, short sellers had their hands tied due to the uptick rule.
“It's $189 bid, and the stock wants to go down and they're all piling on at $189.01 because everyone wants to hit the $189, but you can't hit it because of the alternative uptick rule. So it just sits there for like 20-30 seconds,” Dick said.
“That's the argument that I've given against the uptick rule for a long time. it leads to market inefficiencies.”
Beyond Meat may see some additional selling pressure on Friday once short sellers are cleared from the uptick rule restrictions.
The stock traded around $176.56 per share at time of publication.
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