GEORGE F. LEE / GLEE@STARBULLETIN.COM
Hawaiian Airlines' stock has experienced a surge in volume despite the company being in Chapter 11 reorganization bankruptcy.
Institutions pile in
to Hawaiian stockThe shares have more than
doubled in the last week to $1.60
Hawaiian Holdings Inc.'s stock apparently isn't just for the small investor anymore.
The shares of Hawaiian Airlines' parent, which several insiders expected to end up worthless during the airline's Chapter 11 reorganization, have more than doubled in price in the past week.
Andrew Schwarz, whose firm is the market specialist for Hawaiian on the American Stock Exchange, said yesterday that Hawaiian's stock "is being acquired by some institutional money.
"That could mean anything," said Schwarz, a partner with AGS Specialist Partners. "The orders have been very large on the buy side. A retail (individual) order would be like 100, 500 or 1,000 shares, but when you get an order of six figures, you're talking institutional."
Volume, which has averaged just under 120,000 shares daily over the past six months, was 82,400 exactly a week ago when the stock closed at 79 cents. But the volume has swelled since then in pushing the shares to a seven-month high yesterday of $1.60. It hit $1.70 at one point during the day. The stock had 979,600 shares exchange hands on Monday, with volume on Tuesday hitting 662,100 and yesterday's volume reaching 676,000.
Hawaiian Holdings attorney Richard Havel said yesterday that the company was contacted Tuesday by the Amex regarding the unusual trading activity.
"We said we had no idea what was causing the volume," said Havel, who also represents John Adams, the ousted chairman and chief executive of the airline. Adams' partnership, AIP LLC, still remains Hawaiian's controlling shareholder with just more than half of the company's shares.
Adams, who was replaced by a U.S. Bankruptcy Court trustee because of questionable financial dealings, didn't return a call left at his New York office of Smith Management Co., where he is president.
Havel, however, said he wasn't aware of any involvement in the recent trading by Adams or his businesses.
Schwarz said that a lot of the trading involving Hawaiian's stock is occurring in Electronic Communication Network markets such as Archipelago and Island.
"They are a marketplace in themselves," Schwarz said. "They're for people who have limited capital and want to trade stocks and are attracted to low-price companies that have some volatility in them. They can trade them quickly on ECNs because they are a cheaper alternative than trading on an exchange, and they also give quicker reports. They attract daytrader money."
Schwarz ruled out the possibility of a short squeeze, in which investors who borrowed the shares and resold them in the hope of profiting from a decline are forced to buy the shares back as the stock rises in order to cover their position. A rising stock for a short seller could result in unlimited losses. Hawaiian, which has roughly 28.5 million shares outstanding, has 78,173 shares in short interest. Schwarz said substantial short interest in a company generally would involve at least several hundreds of thousands of shares.
Schwarz said the recent rise in many airline stocks also may be attracting buyers.
As an example, he mentioned American Airlines parent AMR Corp., which has risen from a six-month closing low of $1.58 in March to $13.15 as of yesterday's close.
"People see that kind of pattern in a lot of airlines and Hawaiian is an inexpensive and easy way to play that," Schwarz said.
Havel, who said he continues to believe there's value in the stock, said Hawaiian Holdings ultimately may try to bring in an outside investor if it needs additional capital for a reorganization plan.
"Our plan would be some kind of combination with current equity and current investors if we go forward (as opposed to reissuing new shares to creditors like the airline did during its reorganization 10 years ago)," Havel said.
"We haven't seen the elements of (the trustee's) plan yet so we can't tell for sure (if there will be one or two plans)."
In another development, Boeing Capital Corp., which leases Hawaiian Airlines 16 of its 27 planes, said yesterday it is discussing another extension with the company. The current one, which is the fourth extension, is due to expire Sept. 30.
"At this point, there's no agreement," Boeing Capital spokesman Russ Young said. "(The extensions) have been my mutual agreement. I think that the best thing we can do is extend by 30 days at a time. Obviously, we're both looking for when the time is right, and hopefully we'll be able to come up with a long-term solution."
Hawaiian already has restructured its lease agreements with International Lease Finance Corp. and Ansett Worldwide.
