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Being on the brink of bankruptcy no longer seems to matter much in the U.S. stock market. While that might sound like the beginning of a cautionary tale about the state of investing in 2021, the reality is far stranger, according to a Bloomberg commentary. Redditors have bid up shares of AMC Entertainment Holdings Inc. and GameStop Corp. so much that it’s saved them — for now, at least — from deep trouble. They’re not the only troubled companies where social-media users are trying to conjure magic. In a broad benchmark of U.S. stocks known as the Russell 3000 Index, there are 726 companies whose earnings don’t cover their interest payments, a red flag to pros, according to data compiled by Bloomberg. These zombies are up an average of 30% in 2021 — trouncing the 13% return for the whole index — and 41 of them have doubled since New Year’s Eve. Even explicitly dire warnings don’t seem to register. A bankruptcy plan under consideration by GTT Communications Inc. would wipe out shareholders, which is typical in chapter 11 cases, Bloomberg reported May 24. Nevertheless, the company’s stock is up about 69% since then. Wall Street is starting to factor in the impact of traders drumming up enthusiasm for stocks on social media and Reddit threads. Theater operator AMC, which was on the brink of bankruptcy last year, now has a “path to a sustainable capital structure,” according to S&P Global Ratings, in part because it’s been able to sell new shares amid huge demand from retail investors. Video-game retailer GameStop is now debt-free for the same reason.

A federal judge halted payments for a loan forgiveness program that provides relief to agricultural producers of color, the Milwaukee Journal Sentinel reported. A temporary restraining order was handed down Thursday afternoon by Judge William Griesbach of Wisconsin's Eastern District, in response to a lawsuit filed by the conservative Wisconsin Institute for Law and Liberty in April. The group alleged that the Biden administration used an unconstitutional program in an effort to end systemic racism and should make the relief available to white farmers, too. Since the filing of the lawsuit, the U.S. Department of Agriculture officials have continued to implement the program and is currently reviewing what the restraining order means for the program. "We respectfully disagree with this temporary order and USDA will continue to forcefully defend our ability to carry out this act of Congress and deliver debt relief to socially disadvantaged borrowers," said a USDA spokesperson. "When the temporary order is lifted, USDA will be prepared to provide the debt relief authorized by Congress.” The Biden administration created the loan forgiveness program for socially disadvantaged farmers and ranchers earlier this year under the American Rescue Plan Act. The program paid up to 120% of direct or guaranteed farm loan balances for producers who are Black, American Indian or Alaskan native, Hispanic or Latino, and Asian American or Pacific Islander.

The 25 U.S. states calling an early halt to pandemic-related federal unemployment benefits have recovered more of the jobs lost during the crisis than other states, possibly limiting how much of a dent ending the weekly $300 payments will make in the national battle to fill record job vacancies, Reuters reported. Republicans have taken aim at the enhanced benefits, which were first approved by Congress in a massive relief package last year and later extended, arguing they discourage people from returning to work and are no longer needed given the easing pandemic. Four Republican-led states are ending the payments as of Saturday, with 21 others following suit through early July. "Business owners ... are struggling not because of COVID-19 but because of labor shortages resulting from these excessive federal unemployment programs," Missouri Governor Mike Parson said last month as he announced a June 12 cut-off to the payments in his state. Payments to sole proprietors and contractors typically not eligible for unemployment insurance also will end. But in Missouri, as in the other states pulling the plug early on the benefits, the margin to boost local labor supply may be thinning. The state already has clawed back about 90% of the jobs it lost last year as the spread of the coronavirus devastated the U.S. economy. As of April, when its payroll jobs topped 2.94 million, there were only 16,000 more unemployed Missourians than before the pandemic, and about 93,000 collecting pandemic unemployment benefits. That pool includes solo contractors and gig workers on benefits for the first time during the crisis, and it is unclear how many will shift to conventional payroll jobs or resume old ones. Overall, U.S. Bureau of Labor Statistics data for April, the latest available, showed the 25 states planning to cancel benefits early have recovered about 80% of the jobs they lost during the crisis, versus a 66% recovery rate in the rest of the nation.

Blackstone Group Inc. and Starwood Capital Group’s proposed takeover of Extended Stay America Inc. is expected to pass a shareholder vote Friday despite opposition from some of its investors, Bloomberg News reported. Early results show that investors in the lodging company will approve the deal. The figures are preliminary, and shareholders could still change their vote ahead of the meeting Friday. The vote as of Thursday was extremely close. The private equity firms agreed to buy Extended Stay in March for $19.50 a share, boosting their offer by $1 per share after opposition from six shareholders, including Tarsadia Capital, which campaigned to block the deal. Tarsadia and some other investors continued to oppose the deal despite the price increase, arguing that the sales process was flawed, the timing was wrong, and the standalone prospects for the company were better than the value being offered. 

Hertz Global Holdings Inc. shareholders have officially notched an improbable win. If not for U.S. regulators, the victory could have been twice as sweet, Bloomberg News reported. All told, Hertz’s bankruptcy exit plan will repay creditors and return more than $1 billion of value to shareholders, lawyer Tom Lauria said on behalf of the company in a Thursday court hearing. But the deal might have delivered more than twice that if Hertz had succeeded in issuing stock to fund its bankruptcy last year, Lauria said. Hertz was an early favorite of traders on Reddit’s WallStreetBets forum, and the ensuing rally prompted the bankrupt firm to explore selling potentially “worthless” shares to raise cash. Hertz scrapped those efforts after Securities and Exchange Commission officials questioned the unusual approach. Instead, Hertz had to borrow more money to fund operations, ultimately arranging a $1.65 billion debtor-in-possession loan from the likes of Apollo Global Management. Because all creditors have to be repaid before equity can get anything in U.S. bankruptcy, the additional debt weighed on recoveries for stockholders. Still, Hertz’s bankruptcy plan is “a fantastic result,” U.S. Bankruptcy Judge Mary Walrath said in hearing Thursday, noting that payouts to equity are virtually unheard of in chapter 11. The case “surpasses any result that I’ve seen in any chapter 11 case that I’ve faced in my 20-plus years,” Judge Walrath said. Read more.

In related news, Hertz Global Holdings Inc. is concluding a chapter 11 case that generated big gains for shareholders, who are usually an afterthought in corporate bankruptcies, WSJ Pro Bankruptcy reported. Bullish individual investors, in particular, were drawn to Hertz and were rewarded for the risk they took on a bankrupt stock. But many of Hertz’s backers are unfamiliar with the bankruptcy process and with their options to get paid under the company’s exit plan, which was approved by a judge Thursday. WSJ Pro Bankruptcy breaks down the choices facing Hertz shareholders, who have a Friday deadline for some parts of the payout. Read more.

U.S. household wealth jumped to a record $136.9 trillion at the end of March, a report from the Federal Reserve showed on Thursday, suggesting plenty of dry tinder for economic growth as the coronavirus pandemic recedes and the nation reopens, Reuters reported. Rising equity markets drove the overall increase in wealth, adding $3.2 trillion to household assets in the first quarter. Rising real estate values added around $1 trillion, according to the U.S. central bank's latest quarterly report on household, business and government financial accounts. Overall U.S. household wealth rose $5 trillion from the fourth quarter. Balances in cash, checking accounts, and savings deposits swelled by about a combined $850 billion in the first quarter to a record $14.5 trillion, the report showed, bolstered by massive government aid aimed at blunting the economic fallout from the pandemic and bridging families to the other side of the crisis.

A bipartisan group of 10 Senate Democrats and Republicans yesterday reached a new deal on infrastructure, agreeing to a nearly $1 trillion, five-year package to improve the country’s roads, bridges, pipes and Internet connections, the Washington Post reported. The new deal is the product of five Democrats and five Republicans — Bill Cassidy (R-La.), Susan Collins (R-Maine), Joe Manchin III (D-W.Va.), Lisa Murkowski (R-Alaska), Rob Portman (R-Ohio), Mitt Romney (R-Utah), Jeanne Shaheen (D-N.H.), Kyrsten Sinema (D-Ariz.), Jon Tester (D-Mont.), and Mark R. Warner (D-Va.). Their early agreement calls for about $974 billion in infrastructure spending over five years, which comes to about $1.2 trillion when extrapolated over eight years. The package includes roughly $579 billion in new spending. Democrats and Republicans agreed to focus their investments on what they see as core infrastructure, and their plan does not include any new tax increases to finance the spending, the four people familiar with the plan said. But it does appear to wade into politically fraught territory by proposing changes to the gas tax: Lawmakers do not plan to raise the rate, but they do seek to index it to inflation, according to one of the sources, meaning consumers’ costs at the pump could rise.

A bipartisan group of lawmakers is calling on Congress to provide an additional $60 billion in aid to restaurants and bars after the initial relief fund sparked by the COVID-19 pandemic ran dry, The Hill reported. Sens. Kyrsten Sinema (D-Ariz.) and Roger Wicker (R-Miss.) introduced a bill Thursday that would provide an additional $60 billion to the $28.6 billion in restaurant relief funds included in the American Rescue Plan that President Biden signed in March. “Our restaurants are now beginning to recover from a year of lost revenue, but many establishments are still hurting and have not been able to access aid for which they are eligible,” Wicker said in a statement. “Replenishing this fund would help restaurants, their staff, and the broader food supply chain as they continue to get back on their feet.” Reps. Brain Fitzpatrick (R-Pa.) and Earl Blumenauer (D-Ore.) are leading the effort on the House side. Lawmakers said that restaurants need more support to survive the pandemic, which has caused more than 90,000 establishments to close their doors, according to the National Restaurant Association.

Jewelry maker Alex and Ani LLC, which operates dozens of stores, filed for chapter 11 protection yesterday, Bloomberg News reported. The Rhode Island-based jewelery company sells wares like charm bracelets and necklaces and was founded in 2004 by Carolyn Rafaelian. It opened its first store in the state in 2009 and has since expanded locations spanning the United States, Aruba and Panama. Alex and Ani’s filing in Delaware listed assets and liabilities of $100 million to $500 million each. Mall owners Simon Property Group Inc. and Brookfield Property Partners LP are among its largest unsecured creditors; each are owed more than $3 million in rent payments. The filing comes nearly two years after the firm sued Bank of America Corp. for more than $1 billion, in a lawsuit which accused the bank of fraudulently declaring Alex and Ani in default of a $50 million line of credit and of driving it toward bankruptcy. The bank said it strongly disagreed with the allegations at the time. That case was later dropped in August 2019.