Beyond Meat continues to lap the field as the most expensive actively shorted stock in the US market with a stock borrow fee of 161 percent, and intraday rates going even higher, according to S3 Partners data.
Shares in Beyond Meat, a Los Angeles-based producer of plant-based meat substitute products are paying just under $3.6 million per day in stock borrow financing fees, the largest daily financing payment for actively traded shorts, explained S3 Partners managing director, Ihor Dusaniwsky.
Other than Beyond Meat, Zoom Video Communications is the only other stock with more than $1 million in daily stock borrowing costs, S3 data shows.
According to Dusaniwsky, Beyond Meat is so expensive to short because most of the available share to lend are already out on loan.
“Looking at short interest percent of float versus Beyond Meat’s offer rate over time we can see that there is a direct correlation between availability and borrow fees," Dusaniwsky said.
“One anomaly is that the decrease in short interest percent float in mid-September didn’t correlate with a decrease in stock borrow fee, which can be explained by the constant demand for shares over that period even as stock borrow returns were coming in, which allowed lenders to keep rates high.”
The combination of high borrow rates and short interest over $750 million since mid-June has meant that lenders have been able to earn outsized returns in the stock, Dusaniwsky noted.
The latest S3 data shows that shorts paid $3.58 million in financing costs on the 13 October, bringing year-to-date borrow costs up to $405 million.
Dusaniwsky warned short sellers to take into consideration the underlying stock borrow as well as the short interest as a percent of float when making short investment decisions.
“High daily financing costs hit a short seller’s bottom line directly if a stock’s price plateaus the trader will be seeing red financing numbers that are not being offset by daily mark-to-market profits," he explained. "If these financing costs are not accounted for properly on a daily basis, what may look like a profitable trade may in actuality be a loser.”
Earlier this month, IHS Markit’s Sam Pierson also highlighted Beyond Meat as the “outstanding security of the year" which, along with several other red-hot specials had gone a long way propping over securities lending revenue this year.
For more information on how Beyond Meat became the darling of the securities lending market this year, check out the latest issue of Securities Lending Times.
In SLT 238, Christopher Sappo of Tidal Markets discusses Beyond Meat and reviews how his securities lending volatility indicator dataset revealed how some agents might have missed out on even greater revenue.
