Why YRC Worldwide Shares Dropped Today
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of transport company YRC Worldwide fell as much as 25% in trading today after unionized workers rejected a new contract offer.
So what: The International Brotherhood of Teamsters did not approve a memorandum of understanding to extend the contract with YRC, putting labor in flux. Management said one reason the union didn't support the extension was that it wanted YRC to reduce debt, something the company did on Dec. 23 in an agreement with debt holders. By that date, many union members had already turned in ballots, so the current balance sheet may not be such a deterrent if the vote were taken again.
Now what: The December agreement to reduce the company's debt outstanding by $300 million was contingent on the union ratifying a contract extension, so right now both debt and labor have uncertainty. It doesn't appear that either side wants to fight so hard as to sink YRC Worldwide, so it'll just take time to get an agreement done.
The losses YRC has been delivering will keep me out of the stock today, but I don't think today's drop is a reason for bullish investors to panic. I think all parties will give a little and get this issue resolved eventually.
The article Why YRC Worldwide Shares Dropped Today originally appeared on Fool.com.Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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