Yellow Corporation’s (NASDAQ: YELL) stock has experienced a remarkable surge of almost 150% after the company announced its decision to file for bankruptcy. This surprising turn of events has left many wondering why the market’s response seems to be contradicting the conventional expectation of losing market share for a once globally prominent trucking company. Before delving into the reasons behind this unexpected investor reaction, let’s take an in-depth look at the unfolding story.

On July 31, according to a statement by the Teamsters Union, financially struggling U.S. trucking company Yellow Corp (NASDAQ:YELL), formerly known as YRC Worldwide, halted its operations just shy of its 100th anniversary and is seeking bankruptcy protection. This decision comes after the company failed to reorganize and refinance its debt, amounting to over one billion dollars.
Earlier in the month, Yellow managed to avoid a strike by 22,000 workers represented by the Teamsters Union. However, the company has been facing challenges, and recently, it expressed its interest in divesting its third-party logistics company.
Teamsters General President Sean M O’Brien criticized Yellow, stating that despite significant worker concessions and government bailout funding, the company has historically struggled to manage itself effectively. The closure of Yellow would result in the loss of 30,000 jobs.
As the third-largest U.S. trucker globally that specializes in the less-than-truckload segment, Yellow served clients such as Walmart, Home Depot, manufacturers, and Uber Freight. Some of these clients paused their cargo shipments to the company due to concerns that their goods might be at risk of loss or being stranded if Yellow were to go bankrupt.
Yellow is burdened by a significant debt of $1.3 billion, consisting of a $567.4 million term loan due on June 30, 2024, and a $729.4 million U.S. Treasury loan due on September 30, 2024. The latter loan was granted during the pandemic in 2020 in exchange for a 30% stake in the company.
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In June, Yellow revealed that its restructuring and modernization efforts, collectively known as “One Yellow,” were being obstructed by the Teamsters Union. The company believed that these initiatives were crucial for its survival and ability to refinance its $1.3 billion debt, which is due for repayment by 2024. A portion of this debt includes a $700 million pandemic relief loan provided by the U.S. government in 2020, in exchange for a 30% stake in the company, during the leadership of Donald Trump.
The Wall Street Journal reported that the company’s closure of operations was evident from notices sent to customers and employees. It was also reported that a significant number of non-union workers were laid off on Friday.
On Monday, an additional 128 union members at YRC Freight Canada, a subsidiary of Yellow, were instructed not to report for work.
As part of its efforts to recover financially, Yellow has been exploring options to sell its third-party logistics solution provider, Yellow Logistics, and is currently in talks with potential buyers
What happened:
https://twitter.com/HansonZachary/status/1686101776628330496?s=20
The story is gaining significant traction across the digital realm, between news sources and social media platforms, everyone’s talking about it. According to one Twitter user’s analysis, it seems that the company’s stock has soared because the value of its assets far outweigh its liabilities. This indicates that selling off the assets would result in a higher return compared to continuing its operations as a going concern. As a strategic move, Yellow Corporation has chosen to proceed with the bankruptcy filing in light of this evaluation.
https://twitter.com/FreightAlley/status/1686019859472068608?s=20
Moreover, it seems that a considerable number of investors had taken short positions (bet against the company). However, Yellow Corporation’s strategic decision to file for bankruptcy has actually enhanced shareholder value, primarily because the company’s asset value significantly surpasses its liabilities. As a consequence, those who had shorted the stock are now forced to cover their positions, leading to further upward pressure on the stock price. This unexpected turn of events has also contributed to the stock’s surge.
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