Hertz looks to cash in on its newfound stock market fame
Bankruptcy court Judge Mary Walrath set a hearing for today to determine whether bankrupt rental-car company Hertz can issue nearly 250 million new shares of common stock it hopes will fetch around $1 billion.
Why it matters: Shares of bankrupt companies are typically worthless, except in rare instances where a company can repay its debt in full and money is left over for equity holders.
- But Hertz has become a darling of the stock market in recent weeks with its shares rallying from 56 cents on May 26 to $5.53 on Monday (before falling back to $2.06 Thursday).
- It may be the finest test of the greater fool theory ever conducted.
What they're saying: “The recent market prices of and the trading volumes in Hertz’s common stock potentially present a unique opportunity," the company’s lawyers said in a filing.
What others are saying: Jared Ellias, a law professor at UC Hastings College of Law, saw things slightly differently.
"This is outrageous. These directors likely know that the stock is worthless and instead of trying to stop uninformed investors from gambling on a dead stock, they are selling into the market."— Jared Ellias on Twitter
Of note: Hertz trades on the New York Stock Exchange, which has moved to delist the company.