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As usual, Matt Levine covered this pretty well in his newsletter: https://www.bloomberg.com/news/newsletters/2020-06-12/money-stuff-if-you-want-hertz-have-some-

As usual, Matt Levine covered this pretty well in his newsletter: https://www.bloomberg.com/news/newsletters/2020-06-12/money-stuff-if-you-want-hertz-have-some-hertz https://www.bloomberg.com/news/newsletters/2020-06-12/money-... The relevant quote: > Really I can’t decide how to feel about this. On first principles, you should not sell a billion dollars of stock in a bankrupt company to small retail investors who just installed Robinhood on their phones a few months ago. On the other hand, people are definitely doing that anyway [emphasis original]; a notable feature of this weird pandemic market is exactly that hundreds of millions of dollars of stock in Hertz, which is bankrupt, are being sold to small retail investors every day. Hertz just wants permission to do some of that selling itself.

brandmeyer 6y ago
I like his argument. Its pretty reasonable in its principles. But it doesn't work in this situation. Hertz raised 10^7 dollars this way when they were 10^9 in the hole. Looks to me like the executives saw an opportunity to part some people from their money and took it. An outside investor is sharing shares they already have, or short-selling shares with the promise to buy them back later. That's wildly different from issuing new shares when you have inside information which prices them at zero.
- lotsofpulp 6y ago
  > Looks to me like the executives saw an opportunity to part some people from their money and took it. AKA business. > That's wildly different from issuing new shares when you have inside information which prices them at zero. That’s wildly different from Hertz’s bankruptcy being public information. If people want to gamble on unlikely outcomes, that’s their business.
  - foerbert 6y ago
    That description also fits straight up robbery. I don't think it's a particularly meaningful statement in this situation.
    - lotsofpulp 6y ago
      Yes, that’s my point. It’s a meaningless statement in a discussion about fully informed buyers and sellers engaging in voluntary transactions.
    - brewdad 6y ago
      People were buying a lottery ticket. The difference in this case is that there were no jackpot winners.
      - zaphar 6y ago
        It's not uncommon for actual lotteries to have no jackpot winners in a given timeperiod. That's why the pot size keeps growing. At some point the hype from how many big the potential but unlikely payout got increases the share of people buying the ticket. The different between the Hertz stock and a lottery ticket is that eventually the Lottery will payout. But with a stock like Hertz there is no such guarantee.
      - marshmallow_12 6y ago
        To quote Mark Twain (or someone) "The lottery is a tax on people who are bad at math"
        Dylan16807 6y ago
        Presumably the math there is expected value, but does that even matter? Imagine two lotteries that each sell ten million $1 tickets, and will only sell one ticket per person. One has a jackpot of $7 million. The other has a jackpot of $15 million. Math would tell you there's a significant difference between the two, wouldn't it? But I would say the right answer is that the difference in payout doesn't matter. And you probably shouldn't buy either ticket. Am I reading it wrong, is 'math' supposed to mean something else here?
        marshmallow_12 6y ago
        You overanalysed it. The math is simply that you are statistically unlikely to get your dollar back.
  - TomSwirly 6y ago
    Selling something that you know will end up worthless because you know suckers will buy it is wrong. It's morally and ethically theft. Gross, filthy, self-conscious theft. The fact that people just laugh and say, "That's business!" is an indication of how morally bankrupt the business world is.
    - lupire 6y ago
      Almost everything ever sold ends up worthless. The colloquial term for someone who buys something is "consumer".
    - roywiggins 6y ago
      Lots of people sold Hertz stock knowing it was going to be worthless, why should Hertz be singled out?
    - kpommerenke 6y ago
      Let's not talk about Bitcoin again.
    - lotsofpulp 6y ago
      > Selling something that you know will end up worthless because you know suckers will buy it is wrong. This is a discussion about informed buyers who want to gamble on minute probabilities, not suckers.
- Lazare 6y ago
  > That's wildly different from issuing new shares when you have inside information which prices them at zero. Hertz executives were in possession of no such information. The information was very public.

brandmeyer 6y ago

I like his argument. Its pretty reasonable in its principles. But it doesn't work in this situation. Hertz raised 10^7 dollars this way when they were 10^9 in the hole. Looks to me like the executives saw an opportunity to part some people from their money and took it. An outside investor is sharing shares they already have, or short-selling shares with the promise to buy them back later. That's wildly different from issuing new shares when you have inside information which prices them at zero.

lotsofpulp 6y ago
> Looks to me like the executives saw an opportunity to part some people from their money and took it. AKA business. > That's wildly different from issuing new shares when you have inside information which prices them at zero. That’s wildly different from Hertz’s bankruptcy being public information. If people want to gamble on unlikely outcomes, that’s their business.
- foerbert 6y ago
  That description also fits straight up robbery. I don't think it's a particularly meaningful statement in this situation.
  - lotsofpulp 6y ago
    Yes, that’s my point. It’s a meaningless statement in a discussion about fully informed buyers and sellers engaging in voluntary transactions.
  - brewdad 6y ago
    People were buying a lottery ticket. The difference in this case is that there were no jackpot winners.
    - zaphar 6y ago
      It's not uncommon for actual lotteries to have no jackpot winners in a given timeperiod. That's why the pot size keeps growing. At some point the hype from how many big the potential but unlikely payout got increases the share of people buying the ticket. The different between the Hertz stock and a lottery ticket is that eventually the Lottery will payout. But with a stock like Hertz there is no such guarantee.
    - marshmallow_12 6y ago
      To quote Mark Twain (or someone) "The lottery is a tax on people who are bad at math"
      - Dylan16807 6y ago
        Presumably the math there is expected value, but does that even matter? Imagine two lotteries that each sell ten million $1 tickets, and will only sell one ticket per person. One has a jackpot of $7 million. The other has a jackpot of $15 million. Math would tell you there's a significant difference between the two, wouldn't it? But I would say the right answer is that the difference in payout doesn't matter. And you probably shouldn't buy either ticket. Am I reading it wrong, is 'math' supposed to mean something else here?
        marshmallow_12 6y ago
        You overanalysed it. The math is simply that you are statistically unlikely to get your dollar back.
- TomSwirly 6y ago
  Selling something that you know will end up worthless because you know suckers will buy it is wrong. It's morally and ethically theft. Gross, filthy, self-conscious theft. The fact that people just laugh and say, "That's business!" is an indication of how morally bankrupt the business world is.
  - lupire 6y ago
    Almost everything ever sold ends up worthless. The colloquial term for someone who buys something is "consumer".
  - roywiggins 6y ago
    Lots of people sold Hertz stock knowing it was going to be worthless, why should Hertz be singled out?
  - kpommerenke 6y ago
    Let's not talk about Bitcoin again.
  - lotsofpulp 6y ago
    > Selling something that you know will end up worthless because you know suckers will buy it is wrong. This is a discussion about informed buyers who want to gamble on minute probabilities, not suckers.
Lazare 6y ago
> That's wildly different from issuing new shares when you have inside information which prices them at zero. Hertz executives were in possession of no such information. The information was very public.