Normally, shares in a bankrupt company are cancelled when the company emerges from bankruptcy, enabling the company to raise capital by issuing new shares. The intent of bankruptcy law is to shed obligations and become healthy again.
Shares in AMR, which were delisted from the New York Stock Exchange after it filed for bankruptcy protection in November 2011, have been rising in active trading since they closed at 36 cents on Nov. 16. Shares closed Tuesday at 90 cents. In mid-morning trading on Wednesday, shares were rising 27 cents, or 30%, to $1.17.
The gain past $1 a share "is huge because it's close to an important psychological level," said a spokesman for Miami-based Clubpennystock.com, who asked not to be named. "If it can get through the $1 level, it can go up another 50%" because some institutional traders "have different margin rates" at that level.The spokesman noted he has recently spoken with two types of AMR shareholders. "One person has been in it for years and has lost a lot of money," he said. "But recent traders are up 50% to 100%." Both groups were benefiting from the disclosure Tuesday in a regulatory filing of a letter to a U.S. Justice Department attorney from Harvey Miller, the airline's bankruptcy attorney. Miller said AMR has "made remarkable progress in stabilizing their businesses and improving their prospects. " Depending upon the ultimate strategic alternative adopted and pursued, there exists a reasonable possibility that there may be value for AMR equity holders consistent with the absolute priority rule," he said. Earlier, Miller opposed a request by an equity holder to allow a committee to represent equity holders. He said then that it was unlikely that equity holders would receive anything for their shares. But now, he said, a possibility exists. For its part, AMR said in November that its shares would have little or no value when it emerges from bankruptcy. In the filing Tuesday, AMR again cautioned against assuming that the shares will have value. It said that Miller's letter "was not prepared for the purpose of providing the basis for an investment decision."