Q&A: Airline Merger

A reader wants to know: Did we really make such a nice profit so quickly?

Q – My wife and I recently followed the advice of one of your newsletter contributors and purchased stock of US Airways, which at the time was trading on the New York Stock Exchange under the symbol LCC. In fact, we waited a little while after the recommendation and purchased the stock at $22.80.

The merger with American Airlines has now happened, but we’re confused about what appears in our account post the merger (viewing on-line). We now appear to have the same amount of stock in the new company (AAL) at a higher share price. How is this possible? Are we misunderstanding something? Is our on-line broker making a mistake?

We’ve never made this much money “overnight” so we’re a bit cautious about counting these chickens!

Thanks very much for any insights you may have. – Beverly and Adolfo E.

A –  Relax and enjoy. US Airways Group common stock ceased to trade on the NYSE at the close of business on Dec. 6. On Dec. 9, each share outstanding was converted into the right to receive one share of common stock of the merged airline, which trades on Nasdaq under the symbol AAL. This means you now own one share of AAL for every share of NCC you had earlier. AAL was trading on Dec. 27 at US$25.32. – G.P.


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