Hertz Wants To Capitalize On Its Stock Rally, Seeks Permission To Sell Up To $1B In Shares

Hertz Global Holdings Inc. HTZ wants to take advantage of a spike in its stock price registered early this week, selling up to $1 billion in shares.

What Happened

On Monday, the car rental firm shares jumped to $5.53. The shares had closed at a record low of 56 cents on May 26, after the company declared bankruptcy on May 22. 

According to the Wall Street Journal, Hertz wants a bankruptcy judge to sanction a deal with Jefferies LLC to allow it to sell $246.8 million unissued shares.

The company’s lawyers claim that raising capital by the sale of shares is preferable to obtaining strings-attached loans.

“The recent market prices of and the trading volumes in Hertz’s common stock potentially present a unique opportunity,” according to the lawyers.

Why It Matters

Jared Ellias, a law professor at the University of California, Hastings College of Law, told the WSJ that he had studied hundreds of bankruptcies but had never before seen a company try to fund a case with an equity offering.

The New York Stock Exchange began the process of delisting Hertz last month. The company has appealed the notice of delisting.

Corporate bonds issued by the car rental company were trading at 40 cents on the dollar, indicating a lack of creditworthiness, noted the WSJ.

Shares of Hertz would have to sell for more than $4 each for it to raise $1 billion. On Thursday, its shares closed 18.25% lower at $2.06.

Hertz Price Action

Hertz shares traded 8.25% higher at $2.23 in the after-hours session on Thursday.