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Photo: Cindy Ord/Getty Images

"They walked all the way up to the edge — and stopped." That's the verdict of Thomas Gorman, a partner at the law firm Dorsey Whitney and an expert on SEC enforcement, regarding Hertz's attempted sale of $500 million in new equity.

Driving the news: Hertz issued its prospectus on Monday, and then followed up on Wednesday with an update essentially saying "eh, never mind" after SEC chairman Jay Clayton made some pointed comments about the offering on CNBC.

The backdrop: Hertz is the 48th most popular stock among Robinhood investors, ranking right between UCO and GUSH, which are both vehicles for making leveraged bets on the oil industry. Because the company is in bankruptcy, its stock will almost certainly end up worthless — but shareholders will see exciting volatility on the way to zero.

What they're saying: Here's just one of the risk factors that Hertz put in its prospectus.

"As previously disclosed, on May 22, 2020, we filed voluntary petitions under Chapter 11 of the Bankruptcy Code... The price of our common stock has been volatile following the commencement of the Chapter 11 Cases and may decrease in value or become worthless.
"Accordingly, any trading in our common stock during the pendency of our Chapter 11 Cases is highly speculative and poses substantial risks to purchasers of our common stock... There is a significant risk that the holders of our common stock, including purchasers in this offering, will receive no recovery under the Chapter 11 Cases and that our common stock will be worthless."

Between the lines: More than 500 million shares of Hertz traded hands on June 8 alone, when the stock hit an intraday high of $6.25 per share. Given that every trade has a buyer and a seller, it's easy to see why Hertz would want to be the seller in some of these trades.

  • The stock offering promised free no-strings-attached capital for Hertz that would doubtless have been very helpful in terms of getting through bankruptcy.

The bottom line: Clayton has focused on small investors since his arrival at the SEC. It's easy to see why his staff would have had serious problems with this share issuance.

  • While the SEC can't stop stock-market speculators trading the stock to each other on the secondary market, it can — and did — effectively prevent the sophisticated financiers who currently control Hertz from issuing new shares to the gamblers. Hertz might not like it, but even in bankruptcy, it doesn't want to end up afoul of the SEC.

Go deeper: Why Hertz crashed

Go deeper

Dion Rabouin, author of Markets
Sep 1, 2020 - Economy & Business

Apple, Tesla and Zoom power Nasdaq to new record high

Expand chart
Data: FactSet; Chart: Axios Visuals

Tech stocks had a big day on Monday led by gains in three companies, even as U.S. equities broadly ended the day lower.

What happened: Tesla rose 12.5% during the session as traders were again inexplicably lured by its lower share price due to a five-to-one stock split. Apple added 3.5% and Zoom gained 8.6% during the day with its stock jumping by nearly 10% in after-hours trading after posting better-than-expected Q2 earnings.

3 hours ago - World

Scoop: Iran preparing to enrich weapons-grade uranium, Israel warns U.S.

Iranian President Ebrahim Raisi holds a press conference. Photo: Presidency of Iran handout via Getty

Israel has shared intelligence over the past two weeks with the U.S. and several European allies suggesting that Iran is taking technical steps to prepare to enrich uranium to 90% purity — the level needed to produce a nuclear weapon, two U.S. sources briefed on the issue tell me.

Why it matters: Enriching to 90% would bring Iran closer than ever to the nuclear threshold. The Israeli warnings come as nuclear talks resume in Vienna, with Iran returning to the negotiating table on Monday after a five-month hiatus.

Biden: Fight against Omicron won't include "shutdowns or lockdowns"

Photo: Mandel Ngan/AFP via Getty Images

President Biden on Monday said that the new coronavirus variant, Omicron, is "a cause for concern, not a cause for panic."

Driving the news: Biden said later this week the administration will be releasing a strategy on how "we're going to fight COVID this winter. Not with shutdowns or lockdowns, but with more widespread vaccinations, boosters, testing and more."