Feb 28 (Reuters) - Shares of Beyond Meat soared 56% in premarket trading on Wednesday after the plant-based meat maker placed its bets on price hikes and steep cost cuts to turn around its battered margins, triggering a squeeze on its highly shorted shares.
About 37.6% of the company's free float, or shares worth $172.6 million, were shorted as of Monday, according to data and analytics firm Ortex.
"We expect short sellers to add to the buy pressure, and therefore causing a short squeeze," Ortex co-founder Peter Hillerberg said, adding that bearish investors have lost $93 million on paper since Tuesday's close.
Beyond Meat's market value has tumbled 60% over the past year, as consumer sentiment around plant-based meat took a beating due to higher prices amid sticky inflation.
The company reported a 7.8% decline in fourth quarter net revenue to $73.7 million, but that was better than the $66.7 million analysts had expected.
Beyond Meat also laid out plans to "steeply reduce" costs to nurse back its margins bruised by price cuts to make faux meat more appealing to budget-conscious U.S. consumers.
It forecast 2024 gross margins to be in mid- to high-teens percentage range, compared to negative 24.1% in 2023.
"Beyond Meat had its proverbial 'kitchen sink' quarter last night as it embarks on a major restructuring and turnaround effort ... believe management is in the early innings of right-sizing this company for a more sustainable path forward, and question if its guidance is achievable," BTIG analyst Peter Saleh.
The stock was last trading at $11.70, on track to hit near six-month high if gains hold. But that was well below its 12-month high of $19.25 in July last year.
When short sellers rush to exit bearish bets due to a surge in a stock's price, it pushes shares even higher in what is called a short squeeze. (Reporting by Medha Singh in Bengaluru; Editing by Sriraj Kalluvila)
