- Hertz surged as much as 68% on Friday after the company revealed plans to sell up to $1 billion in new stock.
- The move could raise much-needed cash for the company while its shares enjoy a sharp run-up from their late-May lows, the car-rental firm said.
- Hertz stock skyrocketed as much as 1,460% from its May 26 low to Tuesday’s intraday highs as investors pile in with bets on a miraculous escape from bankruptcy proceedings.
- The irrational run-up poses a risk to potential buyers, and the company plans to warn investors “the common stock could ultimately be worthless,” according to a court filing.
- Watch Hertz trade live here.
The car-rental stock has seen wild price action throughout the week as retail investors pile in and cash out of the highly volatile shares. Hertz now aims to take advantage of the swings. The company, which filed for bankruptcy on May 22, asked a bankruptcy lawyer to approve the stock offering on Thursday.
“The recent market prices of and the trading volumes in Hertz’s common stock potentially present a unique opportunity” to raise funds compared to other, less efficient methods, Hertz’s lawyers said Thursday, according to a court filing.
Still, shareholders typically lose in the period after a bankruptcy filing. Debts are paid out to lawyers, suppliers, and creditors before those holding stock see any cash. The company said in the filing it plans to warn participants in the upcoming sale that “the common stock could ultimately be worthless.”
Repayment failure isn’t the only risk shareholders face. Hertz said Wednesday it received a delisting notice from the New York Stock Exchange that cited its bankruptcy proceeding as a reason to halt public trading. The company appealed the notice and requested a hearing to keep its spot on the exchange. While shares will continue to trade hands pending the appeal, the NYSE warned “there can be no assurance … whether there will be equity value in the Company’s common stock,” according to a regulatory filing.
Hertz shares have served as ground-zero for an unusual market phenomenon over recent sessions. Investors have snapped up plummeting shares of newly bankrupt firms in a wild bet for a rapid recovery. Hertz surged 1,460% from the late-May lows to Tuesday’s peak before sinking in the following two sessions.
Apart from the potential stock offering, Hertz plans to ask the bankruptcy court to cancel leases on 144,372 vehicles. The move could save as much as $80.3 million, the company said.
Hertz traded at $2.80 per share as of 12:25 p.m. ET Friday, down 81% year-to-date.
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