MFN Partners Is Betting Big on Near-Bankrupt Yellow (YELL) Stock

Source: Iljanaresvara Studio /

Just after ceasing operations, trucking company Yellow (NASDAQ:YELL) isn’t just trending on market news sites. It’s surging by impressive margins. Yesterday brought news that the former transportation giant would be shutting down and that it would likely be filing for bankruptcy as early as today. As of this writing, though, the company has not confirmed any such plans. NPR reports that it would be the largest trucking industry bankruptcy in U.S. history and that it would leave 30,000 workers without jobs. And while it may be tempting to assume that YELL stock is surging on short squeeze momentum, it turns out that there is another force pushing it up. Hedge fund MFN Partners has made a sizable purchase, adding more than three million Yellow shares.

What does this mean for the future of this struggling company? Let’s take a closer look at the recent events and assess what investors should be expecting from Yellow.

What’s Happening With YELL Stock

As InvestorPlace‘s William White notes, the problems at Yellow began generating headlines last week. Initially, YELL stock plunged as bankruptcy rumors started to circulate. But this morning, it reversed direction and began trending upward, surging by more than 100% in a matter of hours. While shares have dipped slightly, they remain highly elevated from where they ended last week. As of this writing, YELL is up almost 105% for the day, and its trajectory suggests that it could rise even further.

With bankruptcy looming, the economic outlook for Yellow is far from encouraging. But despite these clear concerns, MFN Partners doesn’t appear to be worried. It is currently the company’s largest institutional investor. Market Beat provides a detailed rundown of the investment, noting that the hedge fund purchased 3,022,488 shares of YELL stock on July 28 for $0.65 per share. The purchase totaled $1,964,617.20 at the time. This brings MFN’s Yellow holdings up to 12,771,943 shares, a total value of $8,301,762.95, as stated in a filing with the U.S. Securities and Exchange Commission (SEC).

The outlet also notes MFN isn’t the only financial institution to double down on YELL stock in 2023. As it states:

“Several institutional investors have recently modified their holdings of YELL. Rhumbline Advisers grew its position in shares of Yellow by 6.7% in the first quarter. Rhumbline Advisers now owns 64,099 shares of the company’s stock valued at $449,000 after purchasing an additional 4,035 shares during the period. Dimensional Fund Advisors LP grew its position in shares of Yellow by 146.1% in the first quarter. Dimensional Fund Advisors LP now owns 372,490 shares of the company’s stock valued at $2,611,000 after purchasing an additional 221,161 shares during the period.”

Also on the list of top institutional investors in mutual fund giant Vanguard Group, which recently increased its YELL stock position by 384,964 shares, according to Whale Wisdom.

What It Means

MFN hasn’t issued a statement regarding its recent YELL stock investment. What is known is that the hedge fund must see a reason to maintain faith in the struggling company. In 2020, Yellow received a $700 million loan from the Federal government as part of the paycheck protection program. But CNN reports that according to a recent quarterly earnings report, the company owned the U.S. Treasury Department even more than that, which accounted for “nearly half of the long-term debt on its books.”

That doesn’t exactly suggest that the company is stable. Investors are still awaiting confirmation from Yellow that it will indeed file for bankruptcy.

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Read More:Penny Stocks — How to Profit Without Getting Scammed

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 Publishing Guidelines.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

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