What happened
Shares of Roadrunner Transportation Systems (RRTS 5.44%) hit the gas late in the trading day Tuesday, going from down slightly at 3 p.m. EDT to up 17% for the day, despite no apparent news. The thinly traded sub-$1-per-share stock seemed to get a boost from a couple of large buy orders placed late in the day, a reminder of how volatile companies like Roadrunner can be for investors.
So what
Roadrunner has been dealing with what management has called "corporate trauma," after identifying accounting issues that led to the restatement of several years of financial reports and the indictment last year of two former executives. The company earlier this month reported adjusted fourth-quarter EBITDA (earnings before interest, taxes, depreciation, and amortization) of $2.94 million, compared to a $3.05 million loss a year prior, on revenue of $551 million that was flat year over year.
The company attributed the improvements to better performance in two of its key segments, and lower corporate costs.
Image source: Getty Images.
Shares of Roadrunner have traded below $1 apiece since September 2018, putting the company in violation of New York Stock Exchange requirements and creating the risk of a delisting. In February the company completed a $450 million rights offering that left activist investor and existing Roadrunner shareholder Elliott Management with control of about 90.4% of the common stock.
Roadrunner said on March 13 that its board had approved a 1-for-25 reverse stock split, swapping every 25 shares currently held for a new share, in order to boost the share price and get the stock in compliance with listing requirements.
The thin float currently averages just 1,187,131 shares traded per day, but some large trades late on Tuesday brought the stock's volume up to 3,261,223 for the session and pushed the stock higher into the close.
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Now what
Roadrunner is definitely a company in transition, and it has its work ahead of it. But management believes the rights offering has improved the company's capital structure, and it sees full-year 2019 revenue growth of 9.5% and improving EBITDA.
This trucker has a long road ahead, and I have no desire to jump on board -- at least before April 5, when the reverse split is completed and the stock may stabilize. But if Roadrunner management is able to navigate successfully, this could be an intriguing long-term turnaround story.
