Hertz
This set of conditions resulted in the company declaring bankruptcy, and the stock collapsing from $20 to $0.40 in less than 3 months. At the time, this seemed like the end for Hertz, but it turned out to only be the beginning of its saga. It bottomed as it declared bankruptcy. Then due to several combinations including short-covering, retail traders piling into low-priced stocks, and optimism about the economy normalizing, the stock shot up straight to $6.
Just like Hertz's plunge was catalyzed by the coronavirus. The huge move higher in Hertz was due to a temporary mania in markets where low-priced, beaten-down stocks were bid up in expectations of a V-shaped rebound. Like Hertz, in recent weeks, these stocks have given back a significant chunk of these gains.
Latest Developments
As Hertz's stock crossed $6 and there was unexpected demand for the stock, Hertz sought to take advantage by issuing $500 million billion in additional stock. Given Hertz's situation, even this infusion of cash was unlikely to alter its trajectory. In its filing, Hertz clearly stated that investors in the offering were likely to lose money. This is also reflected in the company's debt which is trading at around 30 cents on the dollar, an indication that bondholders don't expect to get made whole which is a prerequisite for stockholders to make money.
However, the U.S. Securities and Exchange Commission has objected to this plan, and it's stalled. Given that Hertz's current market cap is $240 million, $500 million in additional stock would be incredibly dilutive but not make a meaningful dent in its $19 billion debt load. It could give the company more time to survive and hope that economic conditions improve which could result in its assets becoming more valuable.
Buyout Rumors
From its early-June spike above $6, the stock has given back 80% of these gains. However, in recent days, Hertz has rallied 50% on an analyst note that Carmax
Hertz's price action following this news report was also puzzling. First of all, no news is being reported. Second, just because Hertz gets bought out, it doesn't mean that its stock will necessarily climb especially given there's no reason for a buyer to pay full price. Additionally, the analyst note mostly focused on these companies buying Hertz's used car inventory which is approximately $3 billion.
Selling all the cars at once would temporarily boost their cash position, but it would be less profitable than selling the cars individually and maximizing their return. Overall, the note was mostly negative as it said that Hertz's liquidity position has declined from just under $1 billion in March to $365 million as of June 30.
