Hertz Global Holdings Inc. raised $29 million selling its likely worthless stock before regulators dissuaded the bankrupt rental-car company from selling more.
The Florida-based company, which filed for chapter 11 protection in May, on Monday disclosed the results of a controversial effort to sell as much as $500 million in shares despite the severe financial strains that drove the company into bankruptcy.
Hertz launched the stock sale after its bankruptcy filing, hoping to capitalize on a speculative frenzy fueled by risk-hungry day traders that gave the company a golden opportunity to raise capital it needed to cover its bills.
Bankruptcies typically wipe out shareholders, and Hertz warned in June its bankruptcy “may render our common stock worthless.” Its shares nonetheless went on a gravity-defying rally after its bankruptcy filing, as investors on the popular Robinhood trading app piled in.
Hertz suspended the stock sale after the Securities and Exchange Commission raised questions, but not before issuing 13.9 million shares, netting $29 million, according to a securities filing by the company on Monday.
The stock closed at $1.69 on Monday, implying a $240 million market capitalization.
Hertz said Monday that although it couldn’t predict what would happen to its shares during the bankruptcy, their value would likely be wiped out unless its debt could be fully repaid. For that to happen “would require a significant and rapid and currently unanticipated improvement in business conditions” to pre-coronavirus levels, Hertz said.
The company entered bankruptcy with roughly $19 billion in debt and hundreds of thousands of excess vehicles that have been sitting idle as Americans travel less due to the Covid-19 pandemic.
Hertz also said it has been hunting for emergency loans to keep its operations running. The company said that as of the end of June, it had $1.4 billion in cash, enough to fund operations through December.
The Wall Street Journal reported in June, after the stock sale was suspended, that Hertz was hunting for a financing package.