What occurred
Shares of LATAM Airways Group (NYSE:LTM), gutted by a chapter submitting final week, surged in Tuesday buying and selling and had been up a staggering 55% as of two:42 p.m. EDT right this moment. However the rationale for this isn’t good.
Picture supply: Getty Pictures.
So what
In LATAM’s dwelling nation of Chile, The Santiago Occasions is reporting that COVID-19 infections are hovering, with 105,000 individuals contaminated and greater than 1,100 deaths. Brazil, in the meantime, has the best incidence of coronavirus infections of some other nation, barring solely the U.S.
None of this bodes nicely for any near-term uptick in South American air journey which may assist save LATAM. Nor do there look like some other headlines providing LATAM a lot hope.
Now what
On the contrary, this airline is flying into the tooth of a world recession carrying practically $9 billion in debt, practically as a lot as what the corporate used to do in income yearly, and practically 50 occasions LATAM’s trailing annual earnings. (Which means, on the fee issues are going, it may take so long as a half-century to repay all of the debt it has accrued.)
If there’s any motive why LATAM stock is rising right this moment, I can solely think about it is as a result of short-sellers masking their positions, and locking in earnings from the stock’s 88% decline in value over the previous yr.
