William B. Cassidy | Jun 11, 2010 12:08PM EDT
YRC Worldwide’s stock value fell almost 12 percent Thursday to 20 cents a share, as approximately 131 million shares changed hands in a day of frenzied trading.
Thursday’s drop followed a dramatic plunge in YRC’s stock value Wednesday from 31 cents to 23.1 cents a share. The number of shares traded jumped 80 percent Thursday.
Since Monday, the volume of YRCW shares traded jumped more than 550 percent, from 20.1 million. Its average daily share volume over three months is 46.3 million.
Short selling is a likely reason for the sudden surge in trading. Investors are selling their stock on a short-term contract basis on the expectation that its value will continue to drop.
When the contract expires, they would then buy the stock back at a lower price, profiting from the exchange. If the stock price rises instead, the short sellers would lose money.
Short sellers may be betting they can complete their transactions before the company completes a reverse stock split that would boost its share value back above $1 a share.
The company has said it is planning a reverse split in the 1:5 to 1:25 range to boost its stock and avoid delisting by NASDAQ, which requires a minimum $1 share value.
That reverse split is expected before the end of the second quarter. At 20 cents a share, a 1:5 split would boost the stock’s value to $1 a share. A 1:25 split would raise it to $5.
The company faces delisting if it can’t bring its stock value above $1 by August.
The slide in stock value comes as the nation’s largest trucking operator is reporting improved business, claiming a break-even month in April before taxes.
Chairman, CEO and President William D. Zollars recently told analysts YRC Worldwide enjoyed higher than normal freight volume in May, as did many of its competitors.
The $5.3 billion company is struggling to rebuild its business after averting bankruptcy in 2009 through a debt-for-equity exchange that created billions of new common shares.
--Contact William B. Cassidy at wcassidy@joc.com.