How crazy is the stock market if a company tells investors that they will lose money if they buy their stock?
Hertz, the century-old car rental company, has seen its stock rally since declaring bankruptcy earlier this month. While it has pared some of its huge gains, it is way up from its low of 40 cents a share.
Robinhooders have been blamed for the stock’s dramatic ascent, trying to pump and dump the company.
Management wanted to take advantage of the situation, so it announced that it would issue up to $500 million in common stock. The catch? You’re probably going to lose all your money. This explains why management offloaded a lot of its holdings.
Huh?
That’s what Hertz confirmed in its Securities and Exchange Commission (SEC) filing:
“Although we cannot predict how our common stock will be treated under a plan, we expect that common stock holders would not receive a recovery through any plan unless the holders of more senior claims and interests, such as secured and unsecured indebtedness (which is currently trading at a significant discount), are paid in full, which would require a significant and rapid and currently unanticipated improvement in business conditions to pre-COVID-19 or close to pre-COVID-19 levels.”
Hertz has been trying to fend off the New York Stock Exchange’s plans to delist the company. But Hertz is fighting the move by trying to sell up to $1 billion in stock.
What the heck is happening?
At the time of this writing, Hertz is down 34.% to $1.86.
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