Why Mechel OAO (ADR) Jumped 25% 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 Russian miner Mechel OAO (ADR) jumped as much as 25% today as speculation they may avoid bankruptcy took hold in the market today.

So what: Just two days ago, I was talking about how Mechel's stock was down over 30% because the Russian Economic Minister said bankruptcy was "inevitable". Today, speculation has swung the other way and investors are hoping the company can avoid bankruptcy.

In an interview, CEO Andrey Kostin said "The door is open and if there's a possibility to resolve it, we will" in relation to the company's debt problems. That sentiment is at least taking hold in traders' minds today.

Now what: I'm not sure what else an executive is supposed to say about a company drowning in debt. If Kostin said "we'll probably be bankrupt by the end of the month" he wouldn't be doing his duty to shareholders in trying to save the company, even if it was true.

I think today's move is a dead cat bounce, but I still wouldn't be willing to bet one way or the other on Mechel. It's certainly possible a white knight comes to save the company at the last minute but it seems likely bankruptcy will happen in the near future. For me, this is simply a stock to stay away from and let others gamble on its future.

The article Why Mechel OAO (ADR) Jumped 25% Today originally appeared on Fool.com.

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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