Daniel Arbess got a call from a broker in early February pitching him shares of Riverstone Networks Inc., a Santa Clara, Calif., Internet-equipment company that had filed for bankruptcy protection the day before.

Like others willing to take a bet on troubled companies, Mr. Arbess often buys the bonds of such "distressed" companies, as they are known by professional investors.

But Mr. Arbess made the stock trade, buying an undisclosed number of shares for the New York hedge fund he manages, Xerion Capital Partners. His bet: Riverstone should be able to get a higher price for the assets it was selling than the $170 million Lucent Technologies Inc. had offered the company earlier. Mr. Arbess backed up his bet by helping to form a committee of Riverstone shareholders that pushed the company to hold an auction of the assets.

In late March, Lucent ended up as the winner of that auction, but at a higher price: about $210 million. That transaction closed last week, and Mr. Arbess reckons his fund's share of those proceeds equated to a 30 percent return on an investment he had only held for two months.

Mr. Arbess is among a small but growing band of distressed investors starting to play on the side of shareholders. The development dovetails with a broader trend of hedge funds becoming more vocal investors, sometimes even taking on corporate management with other "activist" shareholders.

In the past, distressed investors have almost always bought bonds, because bondholders of a bankrupt company are more likely to get some money back than are shareholders, who typically end up with worthless or canceled stock. Bondholders and other creditors also dominate financial negotiations with the company by forming committees that are recognized by bankruptcy courts. Stockholder committees are rare.

Or they were. In the past five years, other distressed investors, including hedge funds Appaloosa Management L.P. and Mellon HBV U.S. Event-Driven Fund L.P., have bet on the stocks of companies in bankruptcy proceedings, and these investors have sought court permission to form committees to represent their interests.

John Jerome, a Philadelphia-based partner for the law-firm Saul Ewing LLP who has been handling bankruptcy-court cases for 44 years, says the successful formation of shareholder committees is helping to challenge the "knee-jerk reaction that equity gets wiped out" in the event of a bankruptcy.

Mr. Arbess of Xerion, who had been a bankruptcy lawyer before founding his hedge fund in 2002, believes the Riverstone shareholder committee "generated a very significant increase in value" for other shareholders in the company.

Power utility Mirant Corp., wallboard-maker U.S. Gypsum, seismic-data firm Seitel Inc. and cancer-diagnostic company Impath Inc. are among the companies whose bankruptcy-court cases in the past five years saw equity committees appointed.

And there are likely to be plenty more companies slipping into bankruptcy proceedings where the new breed of distressed investors may want to target equity. These include large, "old economy" companies with large liabilities such as underfunded pension plans or the costs of litigating environmental claims. Many of these companies will use bankruptcy proceedings to shed those liabilities, says Evan Hollander, a partner at the law firm of White & Case LLP in New York. Then they can emerge solvent without wiping out their shareholders.

In late March, a bankruptcy judge approved an equity committee to represent the 300,000 shareholders of auto-parts supplier Delphi Corp. Appaloosa, a Chatham, N.J., fund that holds about 9 percent of Delphi's shares, is leading the formation of that equity committee. Also in March, shareholders of San Jose, Calif., power utility Calpine Corp. were able to form a committee that was approved by the U.S. trustee involved in the company's Chapter 11 case.

Not all shareholder committees are successful. In January, the U.S. trustee working on the bankruptcy-court case of grocery chain Winn-Dixie Stores Inc. disbanded a shareholder committee just five months after it was appointed, concluding there was "no meaningful recovery" for shareholders.

But hedge funds that buy the stocks of distressed companies do their homework, spotting sources of cash and earnings that a troubled company can use to either right itself or at least pay off shareholders as well as bondholders. The special situations in which there is value left for shareholders have gone unnoticed in the past.

"They crunch their numbers a lot more than ordinary shareholders do and therefore are more likely to see value in cases where perhaps it wasn't seen before," says Saul Ewing's Mr. Jerome.