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There's an interesting duality here. Sure in the short term it hurts the stock price, but in the long term it could save the company and raise stock price. Mayb

by kgc 6y ago

There's an interesting duality here. Sure in the short term it hurts the stock price, but in the long term it could save the company and raise stock price. Maybe Robinhood investors are super forward-thinking. (Unless it gets delisted.)

caseysoftware 6y ago
That's what I think most people are missing. A loan comes with an interest rate and repayments. A new offering is just cash minus the fees. It's "free" in terms of future obligations. If this "IBO" gives Hertz the breathing room to restructure, clean up, and come out the other side, then well done. If not, no one will be surprised. This is almost a "no lose" scenario from the Hertz side. If this becomes systemic, that's when things get ugly. Imagine senior execs with a "plan" that they have no intent to execute on, making an offering, paying out its bonuses, and then saying "Oops, it died anyway! Sorry!"
- dragontamer 6y ago
  Almost all restructurings (Chapter 11 Bankruptcy) results in the share price dropping to $0. The bondholders will benefit from this. But its extremely unlikely for shareholders to benefit. This is a company with $17+ Billion in debt, gaining +$1 Billion from a stock offering won't create any value for the shareholders. --------- Lets do another perspective: If a $1 Billion loan would have fixed the Hertz company, then the company wouldn't need to go bankrupt. The bankers would have simply provided the company another $1 Billion in loans.
arkis22 6y ago
you're technically correct but its generally unlikely. equity holders get to keep money if there's money left after satisfying debts. their bonds trade for about 40 cents on the dollar which means bondholders don't think theyll make their money back. which means that there wont be anything left for equity holders. so to be of help, they'd probably need to sell a lot of stock. That also dilutes existing owners as well.
- Scoundreller 6y ago
  Or a competitor comes along and figures, let's eliminate this competitor and merge their operation with ours, instead of it ending up in a bankruptcy auction and who knows who will win. I'll pay the bondholders 45 cents on the dollar TODAY and each equity holder $1/share to get their vote. As with any private sale, this all avoids the bureaucracy of a protracted bankruptcy (where accountants and lawyers get rich off what would get paid to the creditors). Likely? No. Possible? Very.
  - user5994461 6y ago
    Which competitor and where would it get the money from? They're all short on cash. There is no more revenues from car rental since the virus has terminated all personal and business travels.
    - Scoundreller 6y ago
      Uber has $56b in market cap to work with.

by kgc 6y ago

caseysoftware 6y ago

That's what I think most people are missing. A loan comes with an interest rate and repayments. A new offering is just cash minus the fees. It's "free" in terms of future obligations. If this "IBO" gives Hertz the breathing room to restructure, clean up, and come out the other side, then well done. If not, no one will be surprised. This is almost a "no lose" scenario from the Hertz side. If this becomes systemic, that's when things get ugly. Imagine senior execs with a "plan" that they have no intent to execute on, making an offering, paying out its bonuses, and then saying "Oops, it died anyway! Sorry!"

dragontamer 6y ago
Almost all restructurings (Chapter 11 Bankruptcy) results in the share price dropping to $0. The bondholders will benefit from this. But its extremely unlikely for shareholders to benefit. This is a company with $17+ Billion in debt, gaining +$1 Billion from a stock offering won't create any value for the shareholders. --------- Lets do another perspective: If a $1 Billion loan would have fixed the Hertz company, then the company wouldn't need to go bankrupt. The bankers would have simply provided the company another $1 Billion in loans.

arkis22 6y ago

you're technically correct but its generally unlikely. equity holders get to keep money if there's money left after satisfying debts. their bonds trade for about 40 cents on the dollar which means bondholders don't think theyll make their money back. which means that there wont be anything left for equity holders. so to be of help, they'd probably need to sell a lot of stock. That also dilutes existing owners as well.

Scoundreller 6y ago
Or a competitor comes along and figures, let's eliminate this competitor and merge their operation with ours, instead of it ending up in a bankruptcy auction and who knows who will win. I'll pay the bondholders 45 cents on the dollar TODAY and each equity holder $1/share to get their vote. As with any private sale, this all avoids the bureaucracy of a protracted bankruptcy (where accountants and lawyers get rich off what would get paid to the creditors). Likely? No. Possible? Very.
- user5994461 6y ago
  Which competitor and where would it get the money from? They're all short on cash. There is no more revenues from car rental since the virus has terminated all personal and business travels.
  - Scoundreller 6y ago
    Uber has $56b in market cap to work with.