YELL - Yellow Corp.: Delisting Is Imminent Prepare For The Coming Price Collapse

2023-08-08 12:49:34 ET

Summary

• Yellow Corporation is likely to be delisted from NASDAQ soon, which will lead to an imminent and substantial drop in stock price.
• The short squeeze thesis does not apply to YELL due to relatively low short interest compared to other meme and bankrupt listings.
• The price history of BBBYQ immediately following its Chapter 11 filing and delisting in late April is a foreshadowing of YELL's near-term future.
• The buying activity of MFN Partners may be the only potential savior for longs and bane for shorts.

Over the years, I have written four articles about Yellow Corporation ( YELL ). Two of them were bearish, one opportunistically bullish, and a final one where I stated I was going to be watching from the sidelines. As this story wraps up, and shareholders are likely to be wiped out, I figure it's a good time to add in my two cents over where the meme-induced final pump in stock price will be headed over the near term.

Despite the writing being on the wall for a couple of weeks, meme stock traders and other opportunists have bid up the stock up from a $0.43 low to as high as $5.00. With the bankruptcy announcement being made official on Sunday, these traders are on borrowed time before the imminent delisting from the NASDAQ. I suspect the recent price action is from people buying who are just so completely ignorant of the way the market functions or just don't care and want to gamble. The short squeeze thesis we have seen on other meme stocks doesn't really apply here. Despite being headed toward bankruptcy, the short interest of 6.3 million shares out of a total 52 million outstanding isn't that high. As volume has surged to 10s of millions a day, the days to cover have plummeted. This is no Carvana Co. ( CVNA ) nor GameStop Corp. ( GME ) opportunity and whatever short squeeze that could have happened has already happened.

A NASDAQ delisting announcement is likely the next piece of news we hear about the stock. We have a recent example of a bankrupt meme stock to draw from - both in terms of timing of delisting and expectations of near-term price performance - in Bed Bath & Beyond Inc. ( BBBYQ ).

On Sunday, April 23, BBBYQ officially filed for Chapter 11 protection. By the following Tuesday, the company announced that it would be delisted by the NASDAQ, with the stock being suspended by the opening of business on May 3rd. Let's take a look at the stock price performance during that time:

From the date before the Chapter 11 filing through May 3rd, BBBYQ dropped from $0.29 to a low of $0.05. The volume also cratered from hundreds of millions in a day to less than 100 million. While the stock has actually recovered most of those losses since then (beyond all sensibilities), the daily volume has dropped to less than 10 million. Liquidity has exited the stock and only the most loyal of BBBYQ cultists are still propping it up.

YELL doesn't have the cult-like following of BBBYQ, so I don't believe it will have its staying power. Meme stocks thrive on volume. Once volume dissipates, day traders exit and they revert to a more realistic valuation. Once YELL gets delisted from the NASDAQ, traders that use a broker that doesn't support OTC stocks will only have the option to sell their position, not to increase it more by averaging down. This asymmetric trading ability for a substantial portion of shareholders will only add to the selling pressure.

The one potential savior to longs and bane to shorts is the buying activity of MFN Partners. Fellow Seeking Alpha contributor Henrik Alex has gone into details over how MFN's aggressive buying on YELL unleashed the meme stock pump and how it can lead to shorts second-guessing MFN's intent. A lot has been made of MFN also holding a position on trucking peer XPO, Inc. ( XPO ). What is less talked about is the size of that position ( over $400 million ) or the size of MFN's assets under management (nearly $4 billion). While some people are left scratching their heads over MFN's 42% stake in YELL, I'd like to point out that it's the equivalent of the average retail trader throwing $5,000 at a position for fun. Even with the recent surge in price, MFN's YELL position is less than $70 million, or about 1.5% of its AUM. In the absence of some sort of investment thesis that implies a much higher stock price, I have to conclude that they are just gambling, hedging their bets, or in some way trying to influence the Chapter 11 proceedings that will aid in their interests but will still leave shareholders with dust. For instance, maybe MFN thinks this equity position will help it to get a seat at the table to influence one of their rival trucking investments to buy up YELL's assets cheaply.

If we go on BBBYQ's timing, YELL will get a delisting notice this week and will be suspended from the NASDAQ sometime early next week. Anyone buying this stock now at current prices is taking a massive gamble. I have a feeling most of those people don't understand the level of gamble they are taking nor the imminent nature of the gamble blowing up in their faces. Once that becomes apparent to them through a massive loss on their trade, many of them will be cutting bait in disappointment, stop losses will be filled, and the stock will experience a price performance similar to that of BBBYQ in the two weeks following its Chapter 11 filing, if not worse.

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