The Company’s Strange Bankruptcy Saga Continue.
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When Companies Issue Stock for Sale, They Have to File Disclosure staff that warn potential investors about why the Stock May Not Turn to Be a Good Buy. For example, cloton went public Last year, the hot startup to investors that it was Ling Money and Might Continue to do so for some time. Peloton Also Disclosed that it Compettes in a “Highly Competitive Market” and that it mIight Lose businesses if it failed to “Anticipate Consumer Preferences.” This is Pretty Normal Stuff; Stocks Involve Speculation, Some Businesses Work Out and Some Don’t, Let the Buyer Beware, and SO FORTH.
The dyscloses Become Quite a bit weirder at the Company in Question is Bankrupt. Normally, Such Companies Don’t Issue Stock for the Simple Reason that their Stock is Worthless – A Company Goes BanCause IT DOESN’T HAVE ENOUGH ASSETS TO REPAY ITS, LET ALONE RETURN PROFITS TO STOCKHOLDERS. Yet for some reason, Hertz Stock is currently trading at a few dolrs a Share. AS I WROTE LAST WEEK, Maybe IT of the Company Stands a Chance of Running Such a Good Bankruptcy that there is Money Left Over for the Stockholders. More Likely ITE’s Because Retail investors are bored at home with no sports to watch or bet on.
From Hertz’s Perspective, The Question of Why People Want to Buy Its Stock is Not Terribly Important. The Company, Being Insolvent, Needs Money, and a Stock Sale is a Way to Get Some. Last Week, The Judge Oversseeing Hertz’s Bankruptcy Approved Its Plan to SELL $ 500 Million Worth of Stock. Unsecured Creditors Also gave the nod to this plan – AFTER ALL, WHAT’S BETTER FOR A CREDITOR THAN SOOMBODY HANDING UNRESRICTED CASH TO YOUR DISTRESSED FOR NO APPARENT REASON? And so Hertz Filed a Statement on Monday with the Second, Statting Its to SEll Additional Shares of Stock and Laying Out for Investors the Considerable Risks of Investing in Hertz Right Now – while it is bankrupt.
First, Hertz Warned Investors That The New York Stock Exchange Wold Like to Delist Its Stock, Because of, You Know, The Whole Bankruptcy Thing. “Delisting Our Common Stock May Adversely Impact Its Liquidity, Impir Our Stockholders’ Ability to Buy and Sell Our Common Stock, Impir Our Ability to Raise Capital, and the Market Price Common Stock Could Decrease,” the Company Notes. Yes, that does seem like a concert.
Hertz added that a bankruptcy outcome in which Shareholders end up with any Money at all “Wold Require a Significant and Rapid and Currently Unanticipated in Business Conditions to Pre-Covid-19 or CLOSE to Pre-Covid-19 Levels. In Other Words, Once Hertz Completes the Bankruptcy Process, the Stock It is offering to sell you will probably be worn $ 0. That is not necessarily Disqualifying: Lots of Stock Options Are Structured Such that they will probably Be Worthless, But People Buy The Because, in Rare Cases, They Pay Out a Very Large Return Compared to Initial Investment. SO you can think of hertz stock as a far out-of-the-money call option on the value of the Business, which will pay out only in the case of “Significant and Rapid and Currently Unanticipated in Business Conditions.” Or you can think of it as a bet on a single number in roulette-except that an eventual payout, were it to some materialization, Waled almost surrely be much than 35-to-1. Either way, the message is Clear: Prepare to Lose Your Money.
But in case that wasn’t clear enough, the offering twice Says that “there is a significant risk that the holders of our commonary stock, including purchasers in this offering, would recipes no recovery under the Chapter 11 CASES and that Our Common Stock Will Be Worthless.”
You can see why the securities and exchange commission Might look askance at all this, SINCE ONE OF ITS KEY FUNCTIONS IS TO PROTECT INVESTORS – ESPECIALLY UNSOPHISTICATED RETAIL INVESTORS – FROM GETTING SACKED INTO SCAMS. SEC Chairman Jay Clayton Appeared on Cnbc Wednesday Morning, and His Comments About Hertz Had Strong I-Waledn’t-DO-TAT-I-WERE-YOU ENERGY.
“We have let the Company know that we have comments on their disclosure,” Clayton Said. “In Most Cases, always you let a Company know that the sec has been comments on their disclive, they do not go forward unilize Those comments are resolved.”
Becusee hertz is proposing to sell these shares under an offering registration it made with the sec well before it be bankrupt – CALLED A “Shelf offering,” because iTa the stock has been sitting on the shelf in hertz’s office – the Comptany Might to the Process. Sec’s New Blessing. But Clayton ALSO ISSUED WHAT SOUNDED LIKE A WARNING TO THE INVESTMENT Bankers and Lawyers Who Wowed Need to Work on the Sale, and Who Might Being Desperate for a Hail Mary Soluration than itSself is Right Now.
“There are professionals Involved,” Said Clayton. “And look, we at the sec, we’re trying to the Carry Our Responsibility in Situations Like this as best we can, and i expect the other professionals around to the Carry Out their Responsibilities as best they can.”
A Few Hours AFTER CLAYTON MADE THose Remarks, Hertz Disclosed in an Additional Filing That It Had Received Notice That The Second Wauld Be Reviewing the Company’s Stock Sale Plan – and that hertz wouling be delaying the sale, for now, as it ties to resolve.
Hertz Stock Closed Up 2.5 Percent on Wednesday, at $ 2 per share. With it equity offering in doubt, existing stockholders don’t have to worry as they have might have the market COULD SOON EU FLODED WITH ADDITIONAL SHARES COMPETING FOR THE LIMITED ATTENTION OF INVESTORS INTERESTED IN BUYING PROBABLY WORTHING WORTHING WORTHING IN A BANK.
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