An exterior view of Hertz Car Rental during the coronavirus pandemic on May 23, 2020 in New York City. COVID-19 has spread to most countries around the world, claiming over 343,000 lives with over 5.4 million infections reported.
Cindy Ord | Getty Images
Shares of Hertz halted trading Wednesday pending news amid the bankrupt company’s controversial stock sale.
“In this particular situation, we have let the company know that we have comments on their disclosure,” SEC Chairman Jay Clayton said on CNBC’s “Squawk on the Street” on Wednesday. “In most cases when you let a company know that the SEC has comments on their disclosure they do not go forward until those comments are resolved.”
Shares were trading down about half a percent to $1.94.
Hertz filed for bankruptcy May 22, hurt as demand for car rentals dried up as travelers have stayed home during the coronavirus pandemic. The stock hit a low of 40 cents intraday on May 26. But in the days ahead, shares began to recover and eventually surged to more than $6 per share last Monday.
Following the increase, Hertz asked the bankruptcy court Thursday to allow it to sell up to $1 billion in shares, a last ditch effort for it to raise capital even though the value of the stock could get wiped out. The request was approved by the court Friday.
Hertz said in a government filing Monday that it would sell up to $500 million in common stock. It warned potential investors that it’s almost certain that the equity will become worthless.
Such a sale is highly unusual for a company going through Chapter 11 bankruptcy proceedings since common shareholders, who are last in line when assets are allocated during court proceedings, may be left with worthless stock.
The court, in its ruling, said the approval “in no event will result in the issuance” of the shares. The debtors are authorized, but not required, to sell shares of the common stock.
The stock also could be delisted. Hertz in a public filing with the SEC last week said that it has appealed a delisting request by the NYSE.
Trading activity in names like Hertz has spiked on millennial-favored stock trading app Robinhood in the days following the bankruptcy filings, according to Robintrack, which tracks Robinhood account activity but is not affiliated with the company.
– CNBC’s Maggie Fitzgerald contributed to this report
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