Shares in trucking company Yellow Corp (YELL:US) have experienced a powerful rally recently. Last week, they shot up more than 500%.
This large increase in the share price has attracted attention from the short sellers. With that in mind, here’s a look at the latest short interest data on Yellow.
Sharp Increase in Short Interest
Our short interest data shows that Yellow’s short interest has risen dramatically recently. At present, 13.5 million YELL shares are on loan. That represents approximately 40.5% of the free float.
A month ago, there were only around 5.1 million shares on loan. So, the number of shares on loan has increased by around 165% over the last month.
It’s worth noting that over the last month, utilization has increased from around 34.5% to 100%. This indicates that interest in the stock on the short side has increased significantly and that right now short sellers are shorting every share they can get hold of.
Bankruptcy on the Horizon?
It’s not hard to see why the short sellers are betting against Yellow.
Recently, the trucking company notified customers that it had stopped operations and warned the Teamsters union – which represents 22,000 of its 30,000 employees – that it plans to file for bankruptcy.
This came after the company reported a net loss of $54.6 million for Q1 due to a soft demand environment, along with debt of $1.5 billion at the end of the period.
"The company is deeply distressed, and would require monumental operational overhaul as a going concern," said Stifel analyst Bruce Chan in a research note.
Now on August 2, Bloomberg reported that private equity firm Apollo Global Management was nearing a deal to provide new capital to the company.
This is a positive development. However, there is still a fair bit of uncertainty in relation to the company’s prospects.
Where Does Yellow Stock Go From Here?
As for where Yellow stock will go from here, it’s hard to know.
With short interest of over 40%, there is potential for a short squeeze.
However, there is also potential for a significant drop in the share price. If the company was to file for bankruptcy, the stock could fall to zero.
Given the risks, we think investors need to be careful with this stock.
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