Trucking giant Yellow Corporation (NASDAQ:YELL) announced that it has filed a petition for voluntary relief under Chapter 11 of the U.S. Bankruptcy Code. The company’s CEO, Darren Hawkins, blamed “union intransigence” for driving the 100-year-old company out of business.
As Yellow winds down its business, let’s understand the factors behind the fall of this trucking giant.
Why did Yellow Go Out of Business?
Hawkins highlighted that the company developed a “One Yellow” plan to reaccelerate its growth, fix legacy issues, become more competitive, and improve customer service. Under the plan, the company intended to integrate its operations into one trucking brand.
The implementation of the One Yellow Plan needed the approval of the International Brotherhood of Teamsters, or IBT (a labor union). Per the company, the first phase was approved by IBT, and the plan was successful as it reduced redundancies and improved customer service. However, the remainder of the One Yellow program was halted due to the nine-month blockade by IBT. The company termed this an “irreparable harm,” which eventually led to the winding down of its operations.
Besides for union negotiations, the company was also grappling with high debt and lower volumes. Despite these challenges, YELL stock soared significantly in the past week, which was unexpected, making it one of the top meme stocks right now.
Yellow Corporation Stock Rises 405%
Interestingly, shares of Yellow Corporation jumped nearly 405% in the last five trading days. The massive move in YELL stock came despite several media reports highlighting that the company is preparing to file for bankruptcy.
Nonetheless, the hype created around Yellow Corporation on social media platforms lit up its stock. (See the graph below.)
As always, investors should take caution before investing in stocks that have gained significantly without any company-specific reasons or fundamental backing.
