Hertz suspends plans for USD500M stock sale pending SEC review

AP – Hertz said it has put its plans to sell USD500 million worth of stock on hold because the offering is being reviewed by the Securities and Exchange Commission.

Trading in shares of the car rental company, which filed for bankruptcy protection last month, were halted before the announcement. The stock later resumed trading.

Hertz Global Holdings Inc, which is based in Estero, Florida, said on Monday that it received approval from bankruptcy court to proceed with the stock sale. The sale would be an unusual move for a company in the throes of a bankruptcy reorganisation and a very risky proposition for investors.

The company warned that investors who buy its shares face “substantial risks” that the stock they bought might be rendered worthless.

Under a Chapter 11 restructuring, creditors have first dibs on any assets, and typically have to settle for less than full repayment. For people who have bought the company’s stock to have any chance to recoup their investment, Hertz would have to somehow repay its creditors in full first.

Investors would have to bet that the economy will rebound from the coronavirus downturn quickly and that Hertz’s business would improve dramatically so that it could afford to pay off its creditors and exit bankruptcy successfully.

Despite such long odds, shares in Hertz have doubled this month. The stock rose 2.6 per cent to USD2 on Wednesday.