Was this the Very Minute of Peak-Insanity in IPO Stocks?
Was this the Very Minute of Peak-Insanity in IPO Stocks? by Wolf Richter for Wolf Street
Those who bet on the most obvious short in the history of mankind got the heads handed to them.
Every stock-market IPO cycle has this minute. And afterwards is all downhill. And I wish I could be the guy who’d correctly pinpoint the very moment when peak-insanity in IPO stocks occurs, down not only to the day, but the very minute, and then bet on it correctly. So maybe I won’t be that guy, given that I’ve been on record for years as to why I’m not shorting anything anymore in this crazy market. But I have a candidate for this pinpoint minute of peak-insanity: Today at 9:59 a.m. Eastern Time.
This was the minute that the shares of Beyond Meat [BYND] hit for a moment $186.43, giving this company a market capitalization of about $11 billion, billion with a B. This is not some monolithic monopolistic iconic corporation. It’s a small maker of fake-meat hamburgers and hotdogs with just $40 million in sales and $6.6 million in losses last quarter after 10 years in business – just small-company stuff. And it’s competing with a gaggle of other fake-meat hamburger makers.
The IPO price was $25, set on May 27, giving it a valuation of $1.5 billion, which was already nuts for a company of this minuscule size. The next day, the first trade took place just after noon, at $46, whereupon the price jumped, and shares closed at $65.75, giving it a market cap of nearly $4 billion. And it went from there. Friday, shares surged another 39%. Today until 9:59 a.m., shares surged another 34%.
From the IPO price to today at 9:59 a.m., in less than two weeks, shares soared by 645%. What is nuts is how much the value of this little-bitty company surged from an already nutty IPO valuation.
Beyond Meat is not a biotech company that has gotten FDA approval to sell its cure for cancer that it can flog for $10,000 per daily dose. This is just a fake-meat hamburger and hotdog maker with plenty of competition.
This is not to say there is no market for fake-meat hamburgers and hotdogs. History has proven time and again that, when bombarded with enough hype, marketing, and advertising, we will buy and eat anything.