Las Vegas, NV -- (SBWIRE) -- 08/22/2013 -- AMR Corporation(OTCMKTS:AAMRQ) has been on the rise since the month of May, trading around $7 per share, the stock continued to fly high with its plans of merger worth $14 billion, with U.S Airways. However by the 12th of August the stock significantly dropped, as a result of U.S government filing lawsuit to the planned consolidation of carriers.
AMR Corporation plunged around 56%, valuing its stock around $2.50, and U.S Airways fell by 16%. The justice department sued both companies on the basis that this merger would be the world’s largest carrier, referring to it as, “its anticompetitive effects would lead to higher airfares.” However according to the lawyer of AMR Corporation this lawsuit isn’t exactly a barrier against the approval of the plan.
Back in November 2011, AMR filed for bankruptcy and went into a deal with U.S Airways in the month of February. The merger was decided upon the basis of providing recovery to the unsecured creditors and would provide new stock to shareholders.
However at the present the activity of AMR stock seems a turning point of events, as it climbed by 8.68% till its last session and at the moment is up by 2.94% trading at $3.15 per share, it entered the market today above $3 per share. The US Airways also surged 1.9% along. The Analysts around have started to defend and support the merger and airline stocks, saying that government is not responsible for deciding winners and losers in the airline industry and that this merger should be approved.
In case of bankruptcy the equity shareholders are merely rewarded, and if the merger occurs it would provide the equity holders shares of US Airways, instead of receiving zeros otherwise. This would pull back stock to its high position, however let’s see how far the Justice Department drags this issue which seems likely, but if the merger is approved the company would be back striking highs in the market.
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