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December 07, 2011

Why did AMR stock jump 67 percent on Tuesday?

On a typical day before AMR Corp. filed for bankruptcy last week, about 19 million shares of its stock would change hands on the New York Stock Exchange.

On Tuesday, the volume topped 175 million shares.

At one point, trading was so frenzied that it was halted several times by so-called circuit breakers, which automatically kick in when a large company's share price goes up or down 10 percent or more in five minutes.

In AMR's case, it was up. Way up.

The shares (ticker: AMR) closed the day at 70 cents -- 67 percent higher than on Monday. Since bottoming out at 26 cents on Nov. 29, the day AMR filed its bankruptcy court petition in New York, the shares have climbed 169 percent.

What's up with that?

Think of it as very short-term, very high-risk investing.

Conventional wisdom says the shares are almost certain to become worthless.

In a bankruptcy, shareholders stand last in line to recover any value for their investment. They're behind governments that are owed taxes. They're behind bondholders and banks with secured interests. They're behind the unlucky trade creditors who are owed money.

If anything is left over after all those parties settle up and the bankruptcy wraps up -- a process that typically takes more than a year -- the shareholders might finally get some money.

Star-Telegram writer Jim Fuquay took a closer look at stocks trading in bankruptcy in this article, published in Wednesday's edition.

-Jim Fuquay

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Comments

TiredOfPanderingANDREA

This article does not answer the question posed in the headline. Again the Startlegram has left its readers wanting. Is it the policy of the Startlegram to NEVER COMPLETE A STORY??

LAX FA

Panderer, you leave us wanting for intelligence all the time. That's the pot calling the kettle black!

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