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You dont have to encourage the behavior. You can discourage it. But at the end of the day, it's their money, and it's not causing harm to society or to anyone e

You dont have to encourage the behavior. You can discourage it. But at the end of the day, it's their money, and it's not causing harm to society or to anyone else directly. In a society that's willing to accept gambling and state run lotteries, this level of personal risk taking is not remotely near the level our society seems acceptable. And, they could actually be right in the end, if by providing liquidity they help the company avoid onerous bailout loans, and covid lifts up sooner rather than later, they could end up with Hertz able to make a strong recovery. Or they could lose their money. But it's their money.

dragontamer 6y ago
> And, they could actually be right in the end, if by providing liquidity they help the company avoid onerous bailout loans, and covid lifts up sooner rather than later, they could end up with Hertz able to make a strong recovery. I don't think you understand bankruptcy. Hertz is about to receive a $17 Billion handout, in the form of its loans being largely forgiven and/or reorganized through a process called "Chapter 11 Bankruptcy". As part of "forgiving the debt", the shareholders get the stock set to $0. This is virtually inevitable, it almost always happens. --------- The only winners here, are the banks. The banks (and other bondholders) will collectively get $1 Billion more before the debt is forgiven. As such, this move only helps the banks and bondholders. -------- The $1 Billion here is peanuts compared to the $17 Billion in loans that the Hertz company obviously cannot pay in its current form. The shareholders are wiped out without the secondary offering... the shareholders are wiped out with the secondary offering. In both cases, the company will inevitably go bankrupt... but the shareholders are collectively $1 Billion poorer after this offering. ---------- I cannot imagine how the shareholders benefit from this. In both situations, the shareholders are going to be left with $0 in just a few months.
- Scoundreller 6y ago
  > As part of "forgiving the debt", the shareholders get the stock set to $0. This is virtually inevitable, it almost always happens. Not exactly, the current shareholders are getting paid interest to loan out their shares to short sellers. The longer this gets drawn out, the more interest they collect, and owners could come out ahead of the short-sellers. Even if the shares themselves go to $0 (as everything does in the long-run). Or doing all that indirectly through options. If you know that the stock will still be worth 12 cents in 4 months, that can earn a fortune.
  - dragontamer 6y ago
    > Not exactly, the current shareholders are getting paid interest to loan out their shares to short sellers. I don't believe Robinhood traders get this benefit. A premium service like Interactive Brokers provides the ability to lend shares. Sophisticated investors buying/selling and trying to make money through bankruptcy is fine. The issue I have is that normal, retail investors, are going to be caught up in this game. Under traditional retailer strategy (ie: buy and hold, and/or dollar cost averaging), the retail investor is going to be wiped out here. > Or doing all that indirectly through options. If you know that the stock will still be worth 12 cents in 4 months, that can earn a fortune. You don't need to own any shares to buy or sell options. You can play the options market whenever you feel like.

dragontamer 6y ago

> And, they could actually be right in the end, if by providing liquidity they help the company avoid onerous bailout loans, and covid lifts up sooner rather than later, they could end up with Hertz able to make a strong recovery. I don't think you understand bankruptcy. Hertz is about to receive a $17 Billion handout, in the form of its loans being largely forgiven and/or reorganized through a process called "Chapter 11 Bankruptcy". As part of "forgiving the debt", the shareholders get the stock set to $0. This is virtually inevitable, it almost always happens. --------- The only winners here, are the banks. The banks (and other bondholders) will collectively get $1 Billion more before the debt is forgiven. As such, this move only helps the banks and bondholders. -------- The $1 Billion here is peanuts compared to the $17 Billion in loans that the Hertz company obviously cannot pay in its current form. The shareholders are wiped out without the secondary offering... the shareholders are wiped out with the secondary offering. In both cases, the company will inevitably go bankrupt... but the shareholders are collectively $1 Billion poorer after this offering. ---------- I cannot imagine how the shareholders benefit from this. In both situations, the shareholders are going to be left with $0 in just a few months.

Scoundreller 6y ago
> As part of "forgiving the debt", the shareholders get the stock set to $0. This is virtually inevitable, it almost always happens. Not exactly, the current shareholders are getting paid interest to loan out their shares to short sellers. The longer this gets drawn out, the more interest they collect, and owners could come out ahead of the short-sellers. Even if the shares themselves go to $0 (as everything does in the long-run). Or doing all that indirectly through options. If you know that the stock will still be worth 12 cents in 4 months, that can earn a fortune.
- dragontamer 6y ago
  > Not exactly, the current shareholders are getting paid interest to loan out their shares to short sellers. I don't believe Robinhood traders get this benefit. A premium service like Interactive Brokers provides the ability to lend shares. Sophisticated investors buying/selling and trying to make money through bankruptcy is fine. The issue I have is that normal, retail investors, are going to be caught up in this game. Under traditional retailer strategy (ie: buy and hold, and/or dollar cost averaging), the retail investor is going to be wiped out here. > Or doing all that indirectly through options. If you know that the stock will still be worth 12 cents in 4 months, that can earn a fortune. You don't need to own any shares to buy or sell options. You can play the options market whenever you feel like.