NEW YORK -- Under a recently negotiated bankruptcy plan, the common stock of Continental Airlines Holdings is officially worthless. Even the company says so.
Yet for more than six weeks, over the company's increasingly strident objections, the American Stock Exchange has continued to permit Continental shares to trade on the exchange floor. Investors, apparently unaware that the company has negotiated a plan that will wipe them out, have paid as much as $1.50 apiece for more than 7 million shares over the last week.
Continental refused to pay a $13,000 bill for its 1992 listing fee to drive home its view that the exchange should stop trading the shares.
"This company has no interest in having innocent shareholders throw their money away," said Art Kent, a spokesman for the airline.
Such trading raises questions about how the American exchange and rival stock markets are handling the sticky problems posed by the flood of bankruptcy cases among publicly traded companies. And while the Continental situation is described by traders as particularly egregious, it is not an isolated case.
Investors regularly bid stocks up to gravity-defying levels for reasons that elude even the most knowledgeable observers, including company executives. But the bankruptcy process, which has turned the shares of several familiar companies into little more than wallpaper, has compounded these mysteries.
Bankruptcy investment experts say that shares of several major companies -- LTV Corp., Ames Department Stores, Salant Corp., Orion Pictures -- continue to trade on prominent national exchanges despite court developments that cause these experts to doubt whether the shares are worth anything close to their current prices.
"There are a number of instances where it is virtually certain that the stockholders will get almost nothing," said George Putnam III, an investor and publisher of the Bankruptcy Datasource, which monitors bankruptcy court filings.
"Yet the shares continue to trade. It makes no sense at all."
Christopher Finn, a spokesman for the American exchange, said last night that the exchange would honor any company's request to withdraw, but only when it was accompanied by a formal resolution of the company's board and an application to the Securities and Exchange Commission.
"The exchange is now in receipt of a formal request," he said, referring to Continental's demand. "We have still not received a board resolution."
Otherwise, Mr. Finn said, the exchange will drop Continental only after its bankruptcy plan wins court approval.
A senior executive at the New York Stock Exchange, who refused to be identified, said the exchange would continue to list bankrupted companies, but would remove the shares when a court-approved debt settlement plan "indicates that the security is substantially without value."
The exchange weighs each bankruptcy situation case by case, since each company's financial condition is different, the official said.
But because an exchange listing may suggest to unsophisticated investors that a company remains financially sound, some state securities regulators are concerned about cases like Continental's.
"The exchanges have been saying for years that an exchange listing means something, that there are standards and protections there," said Wayne Klein, Idaho's chief securities regulator. "That may cause people to let their guard down. And if these shares are really about to be worthless, and the professionals all know that, we know who these shares are being sold to."
The Bloomberg Financial Markets service shows that many of the 7 million shares that traded in the last five trading days involved small orders, suggesting that individual investors were among the purchasers.
The rally seems to have been ignited by rumors that the airline was going to be acquired, Mr. Putnam said. But bankruptcy specialists say an acquisition would almost certainly not benefit shareholders because bondholders and other creditors are owed far more than the company would probably fetch in a sale.
"People seem to know enough to know that acquisitions usually affect the stock price," Mr. Putnam said, "but they don't know enough about bankruptcy to know that the creditors get paid first."
A company cannot elect on its own to cancel an exchange listing. Although the American exchange requires a resolution of the company's board and the New York exchange a shareholder vote, both exchanges have the right on their own to drop companies that no longer meet their financial standards.
Continental executives say they have argued since Feb. 6 that the American exchange should do just that.
The recent rally was the final straw for the executives at Continental. On Monday evening, Robert R. Ferguson III, president and chief executive of Continental Holdings, sent an urgent letter to James R. Jones, the chairman of the exchange.