American Airlines said Friday morning that it would issue $1.1 billion in new shares after the stock caught the attention of retail investors waging financial war on short sellers.
Fort Worth-based American said it would issue the new stock through Goldman Sachs, Citigroup, Barclays and BNP. AAL stock has increased in price 18% this week after investors on Reddit’s “WallStreetBets” page had noticed that short sellers had targeted the company.
Retail investors have led a revolt against institutional investors over the last week, a move that has drawn in members of Congress, billionaires like Elon Musk and even pushed investing platform Robin Hood to restrict the new purchase of some of those shares.
Much of the attention has been focused on Grapevine-based Gamestop, whose stock has grown 17-fold since the beginning of the year, but these retail investors have also targeted companies such as Express, Blockbuster, Blackberry and American Airlines. Like GameStop, American’s stock has gained heavy interest from short sellers.
Much of the recent volatility in certain stocks have been part of a targeted effort against short sellers, who social media users say are betting against certain stocks and then manipulating prices.
American shares were among those restricted by investing platform Robin Hood along with GameStop, Blackberry and Express and others. The platform opened limited trading for American and other stocks on Friday, but the restrictions have only spurred more interest in the impacted companies.
American’s stock price is up 18% this week, not nearly the surge seen from some other stocks, but significant considering that the carrier just noted a $2.2 billion loss and has borrowed heavily to avoid financial disaster from the COVID-19 pandemic.
The recent increase in interest has added nearly two billion to American’s market share and company executives would be enthused to get an infusion of cash.
“I want to preemptively state that we will not be commenting nor answering questions on the recent activity in our stock price,” American CEO Doug Parker said Thursday in a call with investors and reports. “As a rule, we don’t speculate on a day-to-day movements in our share price. We stick to that rule today.”
American has drawn heavy interest from short-sellers because it is in the worst financial position among carriers in an industry that has been among the hardest hit by the COVID-19 pandemic. The company reported its worst financial year in history, trumping recessions and bankruptcies.
Investors have also been skeptical despite the recent market movement. However, CFRA analyst Colin Scarola moved his recommendation from sell to hold on Friday after overnight trading showed spike in American Airline prices. AAL shares a down slightly in trading Friday.
“From a fundamental perspective, we estimate AAL’s equity value materially below current market cap,” Scarola wrote in a note to investors. “But we remain at Hold as positive momentum combined with high short interest could cause shares to keep rising.”
