HelloFresh, the meal-kit company, sold its first bond three weeks ago. But the bond has not had a smooth start.
According to EquiLend, the amount of the bond being borrowed - over 10% of the issue - is more than five times the norm for European corporate bonds, a clear sign of substantial short interest.
Such a high level of short selling is unusual for corporate bonds, where bearish bets are far rarer than in stocks. The concentrated borrowing indicates a strong conviction among investors that HelloFresh's credit profile will worsen.
As EquiLend's head of data and insights, Nancy Allen remarked, "It's a clear signal that supply hasn't kept pace with the appetite to short this name."
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Bloomberg price data shows that the bond, originally sold at par on July 1, now trades at about 95 cents per euro. This implies a yield well above the coupon, reflecting the market's pessimistic outlook.
The heavy short selling and elevated borrowing costs reflect deep investor skepticism about HelloFresh's ability to reverse its fortunes. With over 10% of the bond already lent out and borrowed, the market is betting that HelloFresh's troubles are far from over. The bond's poor start reflects these fundamental issues, leaving investors cautious.
HelloFresh operates in a competitive meal-kit market where rivals like Blue Apron and Marley Spoon also face headwinds. The ready-to-eat segment is under pressure from traditional grocery delivery and fast-food chains, adding to the company's difficulties. The S&P downgrade highlighted these factors, and the bond's performance confirms that investors expect continued strain on HelloFresh's financial health.
The aggressive shorting of HelloFresh's bond underscores a broader skepticism about the meal-kit industry's long-term viability. While meal-kit companies initially boomed during pandemic lockdowns, post-pandemic consumer behavior has shifted toward more cost-conscious choices. Grocery delivery and fast-food chains have eroded market share, and technological changes such as AI-driven meal planning could further disrupt the sector. HelloFresh's specific challenges - including declining volumes and its junk rating - have made its bond a prime target for bearish investors who see limited upside.
HelloFresh's struggles are not unique in the meal-kit sector. Rivals like Blue Apron and Marley Spoon have also encountered headwinds as consumers shift to cheaper alternatives. The broader industry faces challenges from grocery delivery services and fast-food chains, while technological advances such as AI-driven meal planning pose additional threats.
These factors contributed to S&P's downgrade of HelloFresh to junk status two months ago, which pointed to declining sales, pressure on household budgets, strong competition, and rapid technological shifts. The bond's poor performance reflects these ongoing issues.
A HelloFresh spokesperson declined to comment.
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