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A Win for WaMu Shareholders?

A U.S. bankruptcy court judge has asked Washington Mutual to provide a list of equity holders with an eye to allowing them to form a committee in the failed thrift's case, according to an analyst.
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NEW YORK (

TheStreet

) -- A U.S. bankruptcy court judge has asked

Washington Mutual

(WAMUQ.PK)

to provide a list of equity holders with an eye to allowing them to form a committee in the case involving the failed Seattle thrift, according to a research note published Thursday.

The news appears to have sparked a big rally in shares of Washington Mutual, which were up nearly 40% to 16 cents on volume of 33 million around midday.

The total was higher than any full day since Sept. 25. Other highly speculative stocks which rallied over the summer, such as Fannie Mae and Freddie Mac, have also recently seen a resurgence of trading activity.

Since Washington Mutual went bankrupt last year and the

Federal Deposit Insurance Corp.

sold its assets to

JPMorgan Chase

(JPM) - Get Report

, JPMorgan's attorneys have been hard at work in at least two major cases.

In the bankruptcy case, Washington Mutual and JPMorgan are battling over $4 billion in deposits and billions in other assets to which both parties have laid claim. In a separate lawsuit, JPMorgan is defending itself against accusations the bank "engaged in sham negotiations," among other tactics "to gain an unfair advantage in obtaining

Washington Mutual assets at a 'fire sale' price."

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The cases came together earlier this week when Washington Mutual attorneys requested the judge allow them to take testimony from a wide range of high profile parties to learn more about the circumstances surrounding the deal.

Those parties include all the major U.S. regulators, as well as executive at

Wells Fargo

(WFC) - Get Report

,

Goldman Sachs

(GS) - Get Report

, and

Moody's Corp.

(MCO) - Get Report

and Standard & Poor's, among others.

CRT Capital analyst Kevin Starke was puzzled that the U.S. Trustee for the Bankruptcy Court of the District of Delaware persuaded the judge to request the Washington Mutual shareholder list, as he believes the WaMu equity "is deeply out of the money," he wrote in his report, arguing the Trustee "can be pretty mercurial as to when she opposes or allows the formation of an equity committee in a bankruptcy case."

Starke notes that in the bankruptcy case of Smurfit Stone Container (SSCCQ) the Trustee has opposed shareholder efforts to create a committee, even though he sees much greater potential for a shareholder recovery in that case.

Starke offers one possible explanation for the Trustee's move, which is that "equity," in this instance, may refer $7.5 billion worth of different classes of preferred shares. Two of these issues, totaling $3.5 billion, trade under the tickers 'WAMPQ' and 'WAMKQ', and were both up more than 25% Thursday.

A call to the Trustee's office was not returned.

Written by Dan Freed in New York.