AMR prices $400 million equity offering

[FWAAA]

It's a good start - but I'd like to see another couple of billion of stock sold. Investors can't seem to get enough stock of money-losing airlines, and the equity can be used to pay down debt.

AMR Prices Public Equity Offering

Tuesday May 16, 9:01 am ET

FORT WORTH, Texas, May 16 /PRNewswire-FirstCall/ -- AMR Corp. (NYSE: AMR - News), the parent company of American Airlines, Inc., announced the pricing of a public offering of approximately $400 million of newly issued shares of its common stock. AMR has granted the underwriter of the offering a 30-day option to purchase up to approximately $60 million worth of additional shares of AMR common stock solely to cover over-allotments, if any. AMR expects the issuance and delivery of the shares to occur on May 19, 2006. AMR intends to use the net proceeds of the offering for general corporate purposes.

Merrill Lynch & Co. is acting as the sole underwriter for this offering.

A shelf registration statement relating to the common stock has been filed with, and was declared effective by, the Securities and Exchange Commission. Copies of the prospectus supplement and accompanying prospectus relating to the offering may be obtained from Merrill Lynch Prospectus Department, 4 World Financial Center, 4th Floor, New York, NY 10080; telephone (212) 449-1000.

http://biz.yahoo.com/prnews/060516/datu025.html?.v=52

 

[Crapdog]

Well there goes the AMR stock prices down the tube. The SEC should do an investigation into this one. The execs knew when this offering was coming out so they sold their options. 400 million will surely dilute the current stock price.

 

[scorpian]

It's a good start - but I'd like to see another couple of billion of stock sold. Investors can't seem to get enough stock of money-losing airlines, and the equity can be used to pay down debt.
http://biz.yahoo.com/prnews/060516/datu025.html?.v=52

Aparently you have excercised your options already!

When are these superior performance bonus recieving execs. going to start producing revenue from ticket sales?

 

[Hopeful]

Aparently you have excercised your options already!

When are these superior performance bonus recieving execs. going to start producing revenue from ticket sales?

QUIT YOUR COMPLAINING!

Didn't you check your EPAYS?

WE GOT ANOTHER $50 AIP PAYOUT!!!!!!

 

[Oneflyer]

Well there goes the AMR stock prices down the tube. The SEC should do an investigation into this one. The execs knew when this offering was coming out so they sold their options. 400 million will surely dilute the current stock price.

400 million won't dilute the stock, but historically stock offerings have been followed by long downward trends. The idea being that the insiders know when the stock is over priced and can get the most for the stock.

 

[limit]

400 million won't dilute the stock, but historically stock offerings have been followed by long downward trends. The idea being that the insiders know when the stock is over priced and can get the most for the stock.

Are you saying that the "long downward trends" are not connected to the additional stock floating around?
I would think that all stock holders (that owned the stock prior to the offering) are damaged in the short term, and nobody could prove otherwise for the long term.

 

[Oneflyer]

Are you saying that the "long downward trends" are not connected to the additional stock floating around?
I would think that all stock holders (that owned the stock prior to the offering) are damaged in the short term

AMR's market cap is about $5 billion, they're offering $400 million, so you're dilluting the stock by about 8% or approximately 2 points. So yes there is a short term effect, there is also a longer term effect as well.

nobody could prove otherwise for the long term.

It is a proven fact that companies that have additional stock offerings, tend to trend downward for long periods of time after the offering. There are various reasons for this other than dilution. The most likely theory is that the company offering the stock wants to do it at a high point and they best know what that high point is. Secondly for most companies issuing debt is generally cheaper than issuing stock, so companies that issue stock tend to be in fincial trouble.

 

[FWAAA]

Aparently you have excercised your options already!

When are these superior performance bonus recieving execs. going to start producing revenue from ticket sales?

Nope - I'm not an employee or AMR or any of its subsidiaries. I already made a fortune on AMR riding the increase from early 2003 to now, so I don't celebrate the dollar or two daily increases nor do I cry about daily decreases in the stock price.

Long-term, AA needs to carry less debt and one way to chip away at that debt is to sell some stock to help pay down that debt. I don't sweat the minor dilution - like I said - I already got mine. B)

You may have missed the news, but AMR was cash flow positive from operations in the first quarter to the tune of $789 million. That keeps up throughout the year, and AMR stands a good shot at paying down some debt. That's a good thing, IMO. That will eventually enable AA to replace some of its aging, fuel-guzzling fleet. It will also enable AA to pay less interest on that smaller debt.

You want a chance of ever getting back some of what you gave up in 2003? Then you ought to be in favor of moves that produce monster-sized profits. Monster-sized losses, OTOH, are the ticket to more concession demands.

So keep whining about the executive's paychecks. That's the ticket. No wonder it's so easy for AA to have its way with you guys.

 

[limit]

QUOTE(limit @ May 17 2006, 09:35 AM)

Are you saying that the "long downward trends" are not connected to the additional stock floating around?
I would think that all stock holders (that owned the stock prior to the offering) are damaged in the short term and

nobody could prove otherwise for the long term.


QUOTE(Oneflyer @ May 17 2006)
It is a proven fact that companies that have additional stock offerings, tend to trend downward for long periods of time after the offering. There are various reasons for this other than dilution. The most likely theory is that the company offering the stock wants to do it at a high point and they best know what that high point is. Secondly for most companies issuing debt is generally cheaper than issuing stock, so companies that issue stock tend to be in financial trouble.
-----------------------------------------------------------

I am not arguing that long term there is not such a trend.
Prior stock owners will be harmed short term and maybe long term.
If they are not harmed long term, you could not prove that the offering was the driving force for any long term gains.
So how is this offering beneficial to you the investor?

 

[Oneflyer]

QUOTE(limit @ May 17 2006, 09:35 AM)

Are you saying that the "long downward trends" are not connected to the additional stock floating around?
I would think that all stock holders (that owned the stock prior to the offering) are damaged in the short term and

nobody could prove otherwise for the long term.
QUOTE(Oneflyer @ May 17 2006)
It is a proven fact that companies that have additional stock offerings, tend to trend downward for long periods of time after the offering. There are various reasons for this other than dilution. The most likely theory is that the company offering the stock wants to do it at a high point and they best know what that high point is. Secondly for most companies issuing debt is generally cheaper than issuing stock, so companies that issue stock tend to be in financial trouble.
-----------------------------------------------------------

I am not arguing that long term there is not such a trend.
Prior stock owners will be harmed short term and maybe long term.
If they are not harmed long term, you could not prove that the offering was the driving force for any long term gains.
So how is this offering beneficial to you the investor?

Its not beneficial at all. I see it as a strong sell sign for AMR stock.

 

[FWAAA]

Its not beneficial at all. I see it as a strong sell sign for AMR stock.

You may be right, but this isn't the first sale of AMR common stock since the concessions were enacted three years ago, and the stock price trend since then has been up.

 

[eolesen]

I disagree that more stock is bad. AMR knew could get money from people willing to buy stock, and did so without mortgaging a single aircraft, incurring more long term debt, or asking a single employee for a pay cut or work rule change.

Sure, there's going to be a minor dip in the price for a week or so, but long term, I don't see that being an issue.

AMR also has a long way to go before they're diluting the long term value to the extent LUV is:

LUV 802.6 Million
DAL 197.3 Million
AMR 189.4 Million
JBLU 173.7 Million
UAUA 97.4 Million

LUV's somewhat flatline stockprice indicates that they're slightly diluted in value due to the huge float, although it's pretty clear that they're probably at or near the top of their growth curve. There just aren't too many markets left for them to enter, and the legacies -are- getting smarter about how they do business.

 

[410OhOne]

I find all this talk about "stockholders" humorous . You see, this is an institutionally held stock, ie. big money, holding companies, insurance companies, etc. This stock is not held by the individual seeking long term growth, or dividends :blink: . Dividends..yeah right! I am betting against a long term downward. I don't agree with the previous posts. Again, I am not running out to buy shares of this company, but I am looking at my "options" on my options.

 

[Oneflyer]

I find all this talk about "stockholders" humorous . You see, this is an institutionally held stock, ie. big money, holding companies, insurance companies, etc. This stock is not held by the individual seeking long term growth, or dividends :blink: . Dividends..yeah right! I am betting against a long term downward. I don't agree with the previous posts. Again, I am not running out to buy shares of this company, but I am looking at my "options" on my options.

What are you talking about? All but one of the top ten holders is a mutual fund company or an asset management firm investing for individuals. The stock is held primarily by growth funds.

 

[eolesen]

Aw, don't go confusing people with facts.

Fidelity, one of the largest institutions, represents millions of individual clients. So does JP Morgan.