We came across a bearish\u00a0thesis on\u00a0RXO, Inc.\u00a0on\u00a0DF Research\u2019s Substack\u00a0by\u00a0Keith Dalrymple. In this article,\u00a0we will summarize the\u00a0bears\u2019\u00a0thesis on\u00a0RXO.\u00a0RXO, Inc.’s\u00a0share was trading at $16.05\u00a0as of\u00a0February 9th.\u00a0RXO\u2019s\u00a0trailing and forward\u00a0P\/E\u00a0were\u00a0715.33\u00a0and\u00a0322.58\u00a0respectively\u00a0according to Yahoo Finance.<\/p>\n Rasica\/Shutterstock.com<\/p>\n RXO, Inc. engages in truck brokerage business in the United States, Canada, Mexico, Asia, and Europe.\u00a0RXO is facing a severe liquidity and operational crisis following a disappointing fourth quarter, with evidence suggesting the company may already be out of cash or extremely close to it.<\/p>\n The regulatory shake-up in the trucking industry during 4Q25 caused spot rates to surge, driving up the cost of purchased transportation faster than RXO could raise customer pricing. This dynamic heavily squeezed gross margins, particularly for RXO\u2019s asset-light model, which relies on brokerage services and fixed-rate contracts, leaving it more exposed than peers.<\/p>\n The author’s analysis estimates gross margins declined 130\u2013225 basis points sequentially to 14.4\u201315.3%, translating into EBITDA of $4\u201318 million, well below management guidance of $20\u201330 million. Negative free cash flow in the quarter, estimated at around $25 million, has likely reduced cash balances to zero, forcing reliance on borrowing or factoring and highlighting a looming solvency risk.<\/p>\n The company\u2019s dependence on its revolver to fund operations intensifies the liquidity concerns, with limited room to\u00a0maneuver. RXO\u2019s structural issues extend beyond cash flow; as a digital broker, it has no pricing power, faces inherent capital losses, and has a history of failed peer models.<\/p>\n Compounding these challenges, emerging accounting concerns\u2014including the sudden retirement of the young Chief Accounting Officer and external reports questioning accounting practices\u2014suggest investors should scrutinize the quality of the financials closely.<\/p>\n Despite a recent 60% stock rally, largely driven by group buying in the trucking sector, RXO\u2019s fundamentals remain weak, its business model is unsustainable, and the company appears dangerously close to bankruptcy. The combination of margin pressure, cash depletion, and accounting opacity underscores the material risks that continue to plague RXO post-spin-off.<\/p>\n Previously, we covered a\u00a0bullish thesis<\/b> on Old Dominion Freight Line, Inc. (ODFL) by Richard Toad in October 2024, highlighting its strong LTL position, high barriers to entry, premium pricing, and cost advantages. ODFL\u2019s stock price has been flat since our coverage due to mixed financial results and an uncertain macroeconomy. Keith Dalrymple offers a contrarian view on RXO, focusing on its liquidity crisis, margin pressure, and accounting concerns.<\/p>\n<\/p><\/div>\n<\/div>\n<\/div>