Many companies have ended up on the verge of bankruptcy thanks to the after-effects of the coronavirus pandemic. Despite the fact that things seem to be getting better for now, with many businesses now operating again once more, the damage has already been done and many giants in the travel industry now about to go under.
That’s exactly what happened to Hertz (NYSE: HTZ), one of the largest rental car companies in the world. The company had officially filed for bankruptcy earlier this month, news that had sent its stock plummeting. Now, however, shares have shot up surprisingly on Friday after the company announced approval to sell up to $1 billion in potentially ‘worthless’ stock to potential value investors interested in distressed assets.
The car rental company hopes to take advantage of this recent rally in the stock market, offering just under 250 million shares to potential investors in an effort to raise some cash. If successful, this fundraising could give some much-needed financial breathing room for the company to pay off its debts.
Although Hertz did admit there’s a big chance the company’s stock could end up being worthless in the short-term, it’s a risk that apparently some investors are willing to take. Certain trash-bin, value-desperate buyers that don’t mind rummaging through distressed companies look at Hertz as an excellent opportunity. These investors are buying up shares on the hopes that this economy will recover and that the travel industry will start to make a comeback soon. While that’s still far from certain at this point, it’s definitely a possibility.
The judge presiding over the bankruptcy court case involving Hertz, Judge Mary Walrath, ended up ruling in favor of the offering, which would help the company if it proves to be successful. “They’ve all been given the warnings. If people want to buy it, fine,” said Melanie Cyganowski, another former bankruptcy judge now turned lawyer.
In response, shares of Hertz jumped by around 37% on Friday in light of the news. It’s a major comeback for the stock, whose price has tumbled dramatically from its $20 high in February down to its current price of just under $3. Most analysts remain quite pessimistic about the company’s chances going forward, especially if there’s a second major outbreak or wave of coronavirus cases in the coming weeks.
Hertz announced last week that the New York Stock Exchange would be delisting the company from the exchange. Besides trying to raise an extra billion via this stock offering, Hertz has also announced it would be canceling its lease agreement on almost half a million vehicles it has in its fleet.
Hertz Company Profile
Hertz Global Holdings Inc operates an automotive vehicle rental service through the Hertz, Dollar, Thrifty, and Firefly brands. The company offers cars, crossovers, and light trucks for rent; ancillary products and services; rental of industrial, construction, and material handling equipment; and fleet-leasing and fleet-management services. The company operates a network of car rental locations and licenses its brands to associates and franchisees. The highest segment by revenue is the U.S. car rental unit. – Warrior Trading News
