AMR stock payout a long-odds gamble some investors are risking
BY JOHN STANCAVAGE World Business Editor
Sunday, February 10, 2013
2/10/13 at 3:54 AM
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Those still holding shares of AMR Corp. may be hoping for some type of payment, but they are facing long odds, financial experts say.
The parent of American Airlines most likely will end up like most companies that go through Chapter 11 bankruptcy - its stock becomes worthless.
"That's the story 98 percent of the time," said Jake Dollarhide, CEO of Longbow Capital Management in Tulsa.
Still, some risk-oriented investors appear to be out there. Shares of AMR were delisted from the New York Stock Exchange with the bankruptcy but still trade over the counter. For much of the fall, the stock was wallowing in the range of 35 cents to 50 cents, but December brought a run that pushed the shares back up over $1.
AMR officials stoked that small fire somewhat last month by commenting that the stock's value had "significantly appreciated" and suggesting there may be a recovery for shareholders.
"Depending upon the ultimate strategic alternative adopted and pursued, there exists a reasonable possibility that there may be value for AMR equity holders," AMR attorney Harvey Miller wrote in a Jan. 3 letter to the Office of the U.S. Trustee, which monitors bankruptcy proceedings.
Since then, little has been heard about the possibility.
"What people have to understand is that in bankruptcy, everyone is ahead of investors - creditors, employees, pension funds," Dollarhide said. "As a shareholder, you are dead last in line."
Still, the recent rise in AMR stock indicates there are some individuals willing to gamble there will be a payout. That strategy could be costly, even if they guess right, Dollarhide said. For instance, if a person buys stock now at $1.45 a share, the payout might be 40 cents. In other words, don't look to AMR for a quick score on the cheap.
What about possible merger partner US Airways? Its shares also have risen as deal rumors have heated up - so much so that its stock also is not a good bet for a fast buck, Dollarhide said.
"It's hard to say if the shares will move that much more if a combination with American occurs," the money manager said.
US Airways' stock has more than tripled since the day before AMR's Chapter 11 filing, compared with a 30 percent advance by the Standard & Poor's 500 Index. The shares are trading for about $15.
At best, US Airways' stock is worth studying as a long-term play, Dollarhide said.
"You would want to look at how it may perform over the next two to five years," the analyst said. "Right now, though, I'd personally rather buy something else in the travel industry other than an airline. Maybe a hotel chain or a car-rental company."
Stock performance
AMR CORP.
Market: OTC
Recent close: $1.46
52-week high: $1.66
52-week low: 36 cents
US AIRWAYS
Market: NYSE
Recent close: $14.75
52-week high: $15.64
52-week low: $6.78
Original Print Headline: AMR stock payout a long-odds gamble
John Stancavage 918-581-8314
john.stancavage@tulsaworld.com
