AMR Delisting Ratchets up the Risk
Tim is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It came as no surprise that AMR announced they were recently notified of the New York Stock Exchange’s (NSYE) intention to delist their stock, along with publicly traded debentures and Public Income Notes (PINES) on January 5th, 2012. As if investors didn’t already have enough to worry about. But the NYSE has their rules and stocks that stay under a $1 a share for 30 straight days are subject to getting tossed. With the ongoing bankruptcy AMR is in no position to argue; nor have they.
As noted in a recent article this was a risky play for those investors betting on either an acquisition or successful transition out of Chapter 11 protection. Of course, it’s even more risky now as the shares are likely to move over to the OTC Bulletin Board later this week, and that’s reflected in the current $0.29 share price.
I’m Just Sayin’
There are a couple of interesting facets to this particular massacre some may find of interest. First, being an airline stock there is a lot of precedent for this sort of thing; a BK and delisting that is. Investors may recall Delta Airlines (NYSE: DAL) and United (NYSE: UAL) both got the proverbial boot after bankruptcy filings in 2005 and 2002, respectively; and for the same reason. You can also add US Airways (NYSE: LCC) to the BK-then subsequently delisted-but now-profitable list of airlines. They were ousted in 2002 as well.
Right now Delta is trading over $8 a share, UAL just under $19 and US Airways around $5 a share, and all have 52-week highs considerably above today's trading. Hey, I’m just sayin’.
Another Interesting Tidbit or Two
With all the delisting news and the ensuing sell off some investors may have missed a recent ruling by the Court. The judge okayed AMR Corp’s request to pursue their deal to buy, yes buy, 32 Boeing (NYSE: BA) planes and reject several less than ideal leases. The result should be a more cost-competitive fleet.
Add to new plane purchase a chance to re-do expensive leases and do away with unprofitable routes for AMR Eagle Holding, the company’s regional line, and an optimist might think there’s a method to all this madness.
No one could fault investors for running as fast and as far as possible from AMR stock; how could they? But at $0.29 a share and with time on your hands (this isn’t going to rectify itself any time soon), it would certainly make the BK proceedings more interesting. And a 1,000 shares for under $300? Hey, I’m just sayin’.
The investment opinions included are just that, opinions. Tim is not a licensed investment professional, nor has he been for several years. Investing involves risk, as you well know, so consider your decisions wisely.