The market vultures are once again closing in on a dying company. Ever since Yellow (OTCMKTS:YELLQ) filed for Chapter 11 bankruptcy and delisted from the Nasdaq, shares of the company have been in a race to the bottom. This week, however, YELLQ stock is actually surging on news that an industry leader may be stepping in.
Why are shares rising today? Well, Old Dominion Freight Line (NASDAQ:ODFL) has submitted a bid for $1.5 billion with the goal of acquiring Yellow’s portfolio of 166 terminals. A few days prior, fellow trucking leader Estes Express Lines also submitted a stalking horse bid of $1.3 billion for the portfolio. With its higher offer, though, Old Dominion has officially launched somewhat of a bidding war.
Of course, YELLQ shares are surging today as a result, but this doesn’t mean that Yellow will recover. Let’s take a closer look at the companies vying for the spoils of this fallen firm.
What’s Happening With YELLQ Stock?
Today marks the first real growth that Yellow stock has seen this month. As of this writing, YELLQ stock is up more than 70% for the day. While the company has seen occasional surges driven by short squeeze speculation before, these quick pops have ended as quickly as they began. The company has been overwhelmed by an onslaught of scary headlines culminating in last week’s trading halt. Now, YELLQ stock trades via an over-the-counter (OTC) exchange.
Last week, InvestorPlace reported that Yellow seemed to be following a similar path to Bed Bath & Beyond (OTCMKTS:BBBYQ). This analogy is further supported by the latest development of multiple buyers swooping in to acquire the company’s assets.
Investors can expect a similar scenario to play out for Yellow. Whenever a company like Yellow takes the bankruptcy route, its more stable peers often try to secure deals for themselves. Of course, Old Dominion may not end up ultimately winning the bid for Yellow’s terminal portfolio. However, any other buyers will have to submit a higher offer to compete with the company. TipRanks reports:
“Per the filing, ODFL has been revealed to be a stalking horse bidder. This means that ODFL has effectively set the floor price of $1.5 billion for Yellow’s assets. As a result, other potential bidders will need to submit higher offers to surpass ODFL’s bid.”
As of this writing, Estes has made no moves to outdo Old Dominion’s current bid yet. A portfolio as large as Yellow’s could certainly help any shipping company, but $1.5 billion is already a fairly high price. Other firms may not be willing to top that offer.
Why It Matters
Regardless of who acquires Yellow’s terminal portfolio, it’s clear that the firm’s last remaining assets will be sold off. At this point, the vultures are already circling Yellow’s carcass. Some retail investors may be tempted to try and hold onto YELLQ stock for as long as possible, but that would be ill-advised. Much like Bed Bath & Beyond, Yellow is winding down operations and the end is in sight.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
