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AMR Shares Will Still Trade

DALLAS ( TheStreet) -- The New York Stock Exchange will delist shares of American Airlines parent AMR (AMR) on Jan. 5, but that won't stop avid traders.

AMR shares will still trade over the counter.

The shares will have no intrinsic value and they are nearly certain to become worthless when the American bankruptcy case ends. This is what has happened in the cases of every other airline that has operated under bankruptcy court protection during the past decade.

In mid-morning trading Friday, AMR shares were trading around 33 cents, down 18 cents. AMR said late Thursday that the NYSE will delist its public equity and debt instruments. The company said it expects that its stock and debt will be traded under new symbols on the OTC Bulletin Board (OTCBB) and Pink Sheets Electronic Quotation Service as early as Jan. 5, 2012.

AMR warned traders that "in most Chapter 11 cases, holders of equity securities receive little or no recovery of value from their investment."

Bankruptcy law is intended to enable companies to shed obligations and to become healthy again. The path to good corporate health includes the right to issue new stock, much of which goes to satisfy creditors. This requires cancellation of pre-bankruptcy stock.

Nevertheless, the shares continue to trade until bankruptcy case ends. Traders presumably include both speculators who know the shares will become worthless and innocents who believe the shares continue to provide ownership in the airline.

In a few recent cases, post-bankruptcy trading was particularly active.

In the case of Northwest Airlines, which filed for bankruptcy in 2005, a coalition of hedge funds contested the normal procedure of declaring shares worthless. In 2007, a group calling itself the Ad Hoc Committee of Equity Security Holders filed a motion seeking representation among creditors. The court appointed an examiner to study the matter, but the case was eventually dropped after the carrier agreed to pay attorney's fees.

In other words, the principal beneficiaries of the share price fluctuation were people smart enough to sell when the shares rose and the attorneys, who got paid.

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