CAPS Rating: 1 out of 5

The holding company for a handful of brands, YRC Worldwide is among the world’s largest providers of transportation services.


Player Avatar TSIF (99.96) Submitted: 6/28/2011 9:20:12 PM : Underperform Start Price: $66.44 YRCW Score: +33.67

YRCW was a 2.5 Bagger in four days, rising from $0.60 to $1.60 yesterday, before retreating back to $1.14 today. YRCW actually has a lot of assets and after renegotiating with the Unions I actually thought they may have had a chance. $4.3 Billion in sales and a $75 Million market cap is fairly tempting and I can see where it bears some investigation. The bottomline, however is that YRCW continued to signal that it is unlikely to dig its way out.

Part of the agreement with unions and bondholders ended up being dilution to the point that stockholders had only a few percent, at best, of any equity left. Losses continue to mount and YRCW has a net negative stockholder equity of $285 Million. With bankruptcy still possible and a negative book value and only 2.5% of the shares left in stockholders hands, a 2.5X 4 day rise in share price should not have occurred.

Some equities facing bankruptcy get new financing as investors/banks, etc, don't want to own the company by foreclosing and they balance their risk reward between letting a company run or taking what is left. Regardless to how it plays out, the shareholders have nothing left. A few company's with decent assets have survived and help fuel the speculators, (GGP, Pilgrim's Pride, etc). Finding company's where the assets can be realigned and their is sufficient equity for the stockholders is rare and neither of these two plays appears to have the attributes, although YRCW might have a year ago if someone didn't dig all the way into the books.

Speculation is one reason that we don't have an efficient market, and it is only getting worse. Evergreen Solar, Inc and YRCW are wrestling to stay out of bankruptcy yet their stock prices dramatically change the market cap in a few short trading hours.

If you decide to participate in these moves then don't be surprised if you're the one left without a chair and sorely limited ass-ets.

Featured Broker Partners