Committees for unsecured creditors are routine. An equity committee is discretionary and is granted only when the court thinks shareholders may be in the money and are not adequately represented. Its job is to argue for a higher enterprise valuation, since a higher valuation is what pushes recovery down the ladder to common.
Traders treat the appointment as a genuine signal, but a costly one: the estate pays the committee's professionals, which reduces the value available to everyone.
Example: creditors value the business at $1.1B against $1.25B of debt. The equity committee's expert argues $1.6B. Settling at $1.35B leaves $100M for equity, about $0.29 a share on 340M shares.
Related: chapter-11, absolute-priority-rule, plan-of-reorganization, post-reorganization-equity, chapter-7