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Why Beyond Meat Stock Popped 18.8% – Then Gave It All Back – The Motley Fool



What happened

Shares of imitation-meat stock Beyond Meat (NASDAQ: BYND) are valued almost beyond belief – costing 88.5 times trailing sales at Tuesday's closing bell – and infinity times the profits that do not earn.

Believe it or not, the stock almost ended up costing even more than that. In early trading today, Beyond Meat stock surged as much as 18.8% before eventually giving back all of its gains and even a bit more. By the time trading was done, Beyond Meat actually ended the day a small fraction of a percent.

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Image source: Getty Images.

what

Basically, the story goes like this: On June 28, the Russell 1000 index of America's 1,000 biggest publicly traded stocks will rebalance its portfolio. Because the index is owned and owned by every company valued at $ 2.4 billion in market cap and up, mutual fund and ETF managers who try to track the Russell 1000's holdings will essentially be forced to buy shares of Beyond Meat

Knowing this, some investors appear to be scooping up Beyond Meat shares beforehand in hopes that when June 28 arrives, they will be able to sell these same shares to buyers who will have to buy them, regardless of price.

Now what

There's just one problem with that theory, however.

Yes, on June 28, some investors will be forced to buy Beyond Meat stock regardless of what it costs. But some does not equal all. At the same time as Russell 1000 trackers are gritting their teeth and reluctantly buying shares of stocking dozens of times their annual sales, everyone else will be free to try to cash in with the shares of Beyond Meat that they bought. in anticipation of the rebalancing.

Result: While it's hard to make predictions, especially about the future, I'd say a very good chance that comes June 28, we'll see a lot of people who "bought the rumor "Same" selling the news "- and instead of going up, Beyond Meat shares could very well go down.

That same realization may be why Beyond Meat stock, which started off so strongly, saw its gains trimmed away as the day wore on.


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