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Hertz gets approved for a truly 2020 way of financing a bankruptcy

June 15, 2020, 1:53 PM UTC

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Though shares of Hertz could be worth nothing, a U.S. bankruptcy court approved the car-rental company’s one-of-a-kind request to sell up to $1 billion equity amid its bankruptcy process.

Seizing on the recent run-up in its stock price owing in part to speculative trading and government stimulus, Hertz has filed to raise $500 million in common stock. The judge who gave the sale the green light said on Friday it was still unclear whether the stock will be worthless by the end of Hertz’s bankruptcy proceedings.

And the risks disclosed in Hertz’s filing for the stock offering aren’t exactly hopeful.

Given that shares are typically subordinate to debt, Hertz shares may be effectively worthless unless there is “a significant and rapid and currently unanticipated improvement in business conditions to pre-COVID-19 or close to pre-COVID-19 levels,” the filing read (bolded for emphasis). Not to mention, shares of Hertz are currently facing delisting threats from the NYSE, a move that would make it significantly more difficult for investors to sell shares. Oh, and, the filing itself mentions the exact word “worthless” seven times.

What’s more, Hertz shares, alongside the wider market, are falling on news of a slow economic recovery in China and a resurgence of Covid-19 cases in the United States.

But then again, it’s 2020, when anything goes. Speculative investors went against conventional wisdom and bought shares of Hertz and other bankrupt companies just a few days ago. Who’s to say they won’t snap up more now?

The numbers inside Quibi: The video-streaming app created for on-to-go consumers has struggled to hit its targets, which could make it much harder to raise additional funding. According to the Wall Street Journal, the company expects that it will have spent $1 billion by the third quarter, and will have to raise at least $200 million in additional funding by the second half of 2021. 

$200 million sounds, well, not insane for a business that has already raised $1.75 billion and budgeted $350 million in spending for content alone for 2019, per the Journal. But it’s a sizable bet on a company that, by the second half of 2021, will have a product that’s been in the public for just over a year. Read more.

Lucinda Shen
Twitter: @shenlucinda


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