Hertz Sold $29 Million in Stock Before SEC Stepped In
August 10 2020 - 7:25PM
Dow Jones News
By Becky Yerak
Hertz Global Holdings Inc. raised $29 million selling its likely
worthless stock before regulators dissuaded the bankrupt rental-car
company from selling more.
The Florida-based company, which filed for chapter 11 protection
in May, on Monday disclosed the results of a controversial effort
to sell as much as $500 million in shares despite the severe
financial strains that drove the company into bankruptcy.
Hertz launched the stock sale after its bankruptcy filing,
hoping to capitalize on a speculative frenzy fueled by risk-hungry
day traders that gave the company a golden opportunity to raise
capital it needed to cover its bills.
Bankruptcies typically wipe out shareholders, and Hertz warned
in June its bankruptcy "may render our common stock worthless." Its
shares nonetheless went on a gravity-defying rally after its
bankruptcy filing, as investors on the popular Robinhood trading
app piled in.
Hertz suspended the stock sale after the Securities and Exchange
Commission raised questions, but not before issuing 13.9 million
shares, netting $29 million, according to a securities filing by
the company on Monday.
The stock closed at $1.69 on Monday, implying a $240 million
market capitalization.
Hertz said Monday that although it couldn't predict what would
happen to its shares during the bankruptcy, their value would
likely be wiped out unless its debt could be fully repaid. For that
to happen "would require a significant and rapid and currently
unanticipated improvement in business conditions" to
pre-coronavirus levels, Hertz said.
The company entered bankruptcy with roughly $19 billion in debt
and hundreds of thousands of excess vehicles that have been sitting
idle as Americans travel less due to the Covid-19 pandemic.
Hertz also said it has been hunting for emergency loans to keep
its operations running. The company said that as of the end of
June, it had $1.4 billion in cash, enough to fund operations
through December.
The Wall Street Journal reported in June, after the stock sale
was suspended, that Hertz was hunting for a financing package.
Write to Becky Yerak at becky.yerak@wsj.com
(END) Dow Jones Newswires
August 10, 2020 19:10 ET (23:10 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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