XPO Logistics Stock Bounces on $1B Share Buyback News

XPO stock plunged yesterday after a scathing Spruce Capital note

Dec 14, 2018 at 10:17 AM
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It's been a volatile week for XPO Logistics Inc (NYSE:XPO), which plunged nearly 10% on Wednesday after the company cut its 2019 adjusted EBITDA forecast, and dropped more than 26% yesterday -- hitting a two-year low of $41.05 along the way -- in the wake of a "strong sell" rating and scathing note from Spruce Capital. Today, XPO stock is up 5.8% at $47.10, after the expedited shipping specialist responded to the short seller, and unveiled a new buyback program.

Specifically, XPO Logistics issued a statement that said Spruce Capital's note -- which called the the stock "uninvestible and a potential zero" -- is "intentionally misleading, with significant inaccuracies." Plus, the freight firm unveiled a $1 billion share repurchase program.

Looking closer at the charts, XPO's long-term trajectory has been to the downside, with the shares off nearly 59% from their Sept. 26 record high of $116.26. The shares are now bracing for their worst quarter on record -- down 59% so far -- and testing the $45 region, which served as both support and resistance in late 2016 and early 2017.

The volatility has sparked a rush of activity in XPO's options pits this morning, with 6,865 calls and 3,776 puts traded so far -- seven times what's typically seen at this point in the day. Call writers may be liquidating their positions at the December 50 strike, while new positions are being initiated at the December 42.50 call and January 2019 47-strike put.

Meanwhile, short-term options are still pricing in sky-high volatility expectations. After topping out at a 52-week peak of 108.8% yesterday, XPO's 30-day at-the-money implied volatility was last seen at 81.6% -- in the 99th annual percentile.


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