The Market is getting absurd: Hertz launching first IBO (no typo). For real…
Hertz is allowed to sell shares of up to one billion dollars, according to a US court decision. A few weeks ago, the car rental company filed for bankruptcy (Chapter 11). We are experiencing the first IBO, the first Initial Bankrupcy Offering. Or simply the proof that it is becoming absurd in the stock market right now.
Hertz plans to launch almost 250 million new shares on the market to finance its restructuring. Normally companies resort to loans for this.
The real economy and the stock market are separate right now (for obvious reasons). Robinhood is opening accounts over accounts. And tens of thousands believe Hertz is a good deal and buying with no end in sight — basically worthless shares in an insolvent company. If the share price was well below one dollar at the end of May, it has bounced up to well over 6 dollars just a few days ago. So many people have made a lot of money. Until now the stock has fallen just under 3 bucks.
It’s quite possible that an upward trend will continue as more people betting on Hertz to go up because “stocks only go up”…
Or it could be stopped quite, quite abruptly showing that stocks, in fact, can also go down too (yes…).
19 billion dollars in debt
Important: According to Wall Street Journal, Hertz is buried under $19 billion in debt.
Important also: There is still the possibility that the project will be stopped by the SEC.
Bottom line: I do not „invest“ in Hertz. It’s gambling — not that there’s anything wrong with that — and nothing more, since the shares “might ultimately be worthless, although it’s impossible to know this as a point of certainty”, as even Hertz’ Lawyer admits.