
Hertz SEC Filing: Up to $500M Common Stock - anthony_r
https://www.sec.gov/Archives/edgar/data/1657853/000110465920073132/tm2022223-1_424b5.htm
======
wjnc
"Although we cannot predict how our common stock will be treated under a plan,
we expect that common stock holders would not receive a recovery through any
plan unless the holders of more senior claims and interests, such as secured
and unsecured indebtedness (which is currently trading at a significant
discount), are paid in full, which would require a significant and rapid and
currently unanticipated improvement in business conditions to pre-COVID-19 or
close to pre-COVID-19 levels."

You will lose all your money unless there is an unanticipated improvement in
business condition! I love how you just can't bullshit in your SEC-filings.

~~~
arbuge
They know very well that the kind of people who read these filings are not the
same kind of people eagerly buying their stock at this point.

~~~
SilasX
Yeah, they’re nothing like the sophisticated, mature investors that are buying
30-year government bonds that probably won’t even keep up with inflation.

To phrase less trollishly: there aren’t a lot of good investments now, and
even government bonds seem overvalued.

~~~
H8crilA
That's called "financial repression". Sorry that it causes you to take
excessive risks, there are many like you.

Walter Bagehot, the de facto founder of The Economist, was of the opinion that
people will never stand 2% rates (and he meant plus :) ). They would rather
fund anything, any project, the weirdest thing that offers any hope of yield;
no matter how stupid.

And here we are, 143 years after Bagehot passed away. Sir, you are still
absolutely correct!

~~~
toomuchtodo
Wouldn’t it be more accurate to call it “financial entitlement”, to believe
that your capital would always have positive value?

While we’ll likely never run out of need for human labor, it’s very possible
we’re running out of capital investment opportunities that realize a risk
adjusted return above 0. “Too much money chasing too few deals” and all that
jazz.

~~~
nogabebop23
>> While we’ll likely never run out of need for human labor, it’s very
possible we’re running out of capital investment opportunities

Is this true? automation is essentially a emphasis from human to physical
capital. It seems like we're continuing to reduce and specialize human capital
while growing other forms.

Now I definitely see an end to passive capital gains in traditional financial
markets; there's a lot of money sloshing around with not enough good places to
put it. Anything near-passive (i.e. real estate) is also feeling similar
pressures. It seems like a great time to build big projects that take a huge
amount of money, I'm just not on board with pure public funding and all the
issues that go with that.

~~~
tschwimmer
I'm becoming less and less bullish on automation. It may be stupid, but I
think that a lot of commmon tasks are functionally un-automatable, or at least
not at an acceptable level of error.

Think about something as simple as phone support for pretty much any product
or service. There's a ton of automation being employed there to relatively
little effect - just try to do anything meaningful at any company yourself and
you'll find you need to be shunted to a representative.

I recently needed to switch my phone plan ownership from a personal account to
a company account. There were a couple of wrinkles that made my case more
complicated than normal which I can't share. Despite 4 or 5 calls, I couldn't
get it done. It just didn't seem like the process for doing this type of
transfer didn't exist in any codified way. I could explain what I wanted to do
in plain language, but it wasn't a valid transition. Not only was it invalid,
it seems like nobody at this major phone provider had ever planned for this
scenario to happen.

Now imagine this scenario under full phone support automation. The system
wouldn't even understand what I was trying to do. You could definitely argue
that you could design some sort of scenario router that might handle a
situation like this, but it seems unlikely that if they couldn't come up with
a human process, I doubt they could swing an automated one.

Something like AGI could handle a problem like this, but it feels like we're
dozens or maybe hundreds of years away from that.

~~~
gowld
> I couldn't get it done.

It's quite easy to automate that outcome.

------
DangerousPie
What a crazy story.

Matt Levine's post about this is great as usual:
[https://www.bloomberg.com/opinion/articles/2020-06-12/if-
you...](https://www.bloomberg.com/opinion/articles/2020-06-12/if-you-want-
hertz-have-some-hertz%0A)

~~~
hn_throwaway_99
Agreed, I think this is the craziest investing story in my lifetime. Trying to
find the HN link from last week about an article that said this was the 3rd
type of bubble: type 1 is you expect the future to continue on with more of
the present indefinitely, type 2 is you expect the future to be substantially
different from the present, and this type 3 is _the future just doesn 't
matter_.

While the world is in a betting mood, I'm just going to bet my 2 cents on "I
don't think this will end well."

~~~
staplers

      Agreed, I think this is the craziest investing story in my lifetime.
    

I remember people buying off-the-market IOUs for bitcoins from people who had
accounts on Mt. Gox at a significant discount _after_ they had announced they
were illiquid and couldn't find them lol.

Link to the company:
[https://bitcoinbuilder.com/](https://bitcoinbuilder.com/)

Looks like they're still in pending status! Wow

~~~
aianus
The price of Bitcoin went up so much after the bankruptcy of Mt. Gox that the
few bitcoins that were recovered were enough to pay off all their creditors
(debts in bankruptcy are denominated in yen or dollars, not Bitcoin) and have
a profit left over.

------
cs702
"Inconceivable!"

Few things could symbolize "the YOLO Stock Market" better than the successful
issuance of worthless stock by a company that is already in bankruptcy after
it has explicitly warned in the prospectus that its stock is worthless unless
there is an "unanticipated improvement in business conditions."

Boring details such as "how much is this worth?" or "does it have any value?"
or "who gets what in this bankruptcy?" are evidently _irrelevant_ to the
buyers of the stock, who must be trying to "beat the gun," as J. M. Keynes
described it nine decades ago[a] -- or maybe they just want to burn money with
reckless courage and abandon as a novel form of conceptual performance art?

[a] See also
[https://news.ycombinator.com/item?id=23517657](https://news.ycombinator.com/item?id=23517657)
and
[https://news.ycombinator.com/item?id=23515797](https://news.ycombinator.com/item?id=23515797)
.

~~~
paulpauper
yeah but the successful insurance of new stock to cover debt means it may no
longer be worthless

~~~
swyx
Reflexivity in motion! George Soros would be delighted.

------
jonplackett
Am I the only person who actually liked Hertz?

Never had a bad experience with them.

Tried a cheaper car rental place ONE time, and the brakes failed on the car...

~~~
linuxftw
I am a Hertz Gold member, which is a free program like flight miles. However,
being a gold member, you can skip the counter and pick up your car (sometimes
you have to go to the 'gold counter' if your flight is delayed, etc). It's
always a quick and painless experience. Definitely saves a ton of time if you
travel frequently. I'll often pay a little bit more because I like their
service (crazy, right?)

I'm really disappointed in Hertz going bankrupt. Hopefully their operation can
continue, I really enjoyed using them.

~~~
OldHand2018
> I am a Hertz Gold member

What's the program they ran that had an annual fee?

They really catered to the business traveler market and if your membership was
paid for by a corporate account then their unstated, unofficial policy was
that if you could return a car under its own power you'd never be charged for
damage.

My wife was a consultant for a construction company many many years ago and
had at least 3 cars totaled from being parked near construction sites. She
once drove a car with a flat tire for nearly 20 miles to avoid missing a
flight. Hertz never batted an eye.

~~~
femto113
There used to be a program called #1 Club Gold that nominally had an annual
fee. A company I worked at in the 90s got free lifetime memberships for all
employees as a perk for making Hertz their preferred agency so even after I
left that company I remained a member. The main benefit was the shuttle buses
dropped you off in that part of the lot first and you could just get in your
car and drive off without waiting in line. At some point in the 2010s that got
merged into the current Gold Plus program.

------
brogrammernot
I don’t get the hate on this offering. It’s a huge gamble for sure, but the
upside is there if they pull it off.

Do I think they will? No, I don’t.

However, as long as someone isn’t betting their life savings on this I don’t
see or take any issue with it.

~~~
tuna-piano
_However, as long as someone isn’t betting their life savings on this I don’t
see or take any issue with it._

...

Thai Gaon, a 23-year-old salesman in San Francisco, bought 35,000 Hertz shares
on June 4 at $1.43, spending a little over $50,000, according to documents
viewed by The Wall Street Journal.

“It was my entire life savings,” he said. “I decided, you know, if I’m gonna
do it, I should do it big, and I’ll make a play and see what comes out of it.”

[https://www.bloomberg.com/opinion/articles/2020-06-12/if-
you...](https://www.bloomberg.com/opinion/articles/2020-06-12/if-you-want-
hertz-have-some-hertz%0A)

~~~
CapriciousCptl
That’s an impressive savings for a 23yo. Imagine all the work and discipline
going into it. I wonder how much work and discipline he put into betting on
Hertz.

~~~
throwaway894345
And Hertz of all companies. My experiences with them have been uniformly
awful; they always try to charge me for insurance or services which I
explicitly decline, and their customer support is openly hostile. I'm sure
they were a competent company at one point in time, but betting your life
savings on a company that is apparently surviving on fraud is bold.

~~~
StrangeDoctor
But all of that shitty behavior is actually good for the shareholders (in the
short term) they were essentially seeing how much you could abuse captive and
or ignorant customers.

------
pascalxus
I for one, will not miss hertz. They charged me 100$ for a baby seat, without
even listing the price. Then, when I confronted them about it, they tried to
deny responsibility by saying it was the billing vendor's fault even though
they're the ones who received the money.

~~~
aorth
Came to say this. In 2019 I opted for Hertz instead of a cheaper local company
because I wanted to be sure to get a proper infant car seat. They charged me
something similar and when I went to pick up the car they had a toddler seat.
I said that my baby is only six months old hello... the Hertz rep asked her
friend from another company next door, who gave us an infant seat, albeit one
that was like a weird reclined plastic shell (with the price tag still on it,
worth $50!). I was super bitter at Hertz after that. We ended up going and
buying a proper car seat for about $150 for our ten-day trip.

------
mediaman
Has it actually filled the offering? The title says it has, but the link is to
the prospectus, which merely must be available before they begin at the market
offerings.

There is no indication I see that this title is correct and that Hertz has
sold all $500 million of the ATM stock offering.

~~~
floatingatoll
It appears to be a typo for "files".

------
eatbitseveryday
OP perhaps saw this comment?

[https://news.ycombinator.com/item?id=23517270](https://news.ycombinator.com/item?id=23517270)

------
bob1029
I see a virtually 0% chance that Hertz emerges from this as the same legal
entity as when they went in.

That said, I have witnessed several corporate miracles within the last decade,
and I am hesitant to dismiss these sorts of herculean efforts. Perhaps they
are grasping at straws, but maybe someone knows something I don't. I usually
default to the latter assumption when dealing with matters this complex. Keep
in mind that when people are up against the ropes and running out of options,
the amount of innovation that occurs can start to skyrocket. Nothing is out of
bounds anymore. Everything becomes an option.

As a result, I have bought an incredibly small # of shares in the extremely
unlikely event that Hertz does emerge from this a viable company. If those
shares evaporate into nothing tomorrow, I won't lose any sleep over it.

------
gfodor
This highlights something that I've always found confusing about the stock
market. The traditional CAPM assumes stocks are priced based upon discounted
future cash flows. But yet, we have many stocks which have an extremely high
liklihood of _never_ returning capital to investors: stocks which are likely
to never buy back shares nor issue dividends. And yet, investors price them as
if that capital will be returned to investors. There does seem to be something
fairly unexplainable about stock valuation by the market. Perhaps this finally
reveals something more to it.

~~~
arawde
That's because CAPM isn't the only way to price stocks. Some stocks can be
priced like options, if they have contingent cashflows. Consider a biotech
startup with a product coming to market. If they get FDA approval, that
company is probably worth a lot! But if they don't, it might be worthless.
Similar for an oil & gas company drilling for resources in a new area.

You might like checking out Aswath Damadoran's videos on valuation
[https://www.youtube.com/watch?v=znmQ7oMiQrM#t=9m23s](https://www.youtube.com/watch?v=znmQ7oMiQrM#t=9m23s).

------
KKKKkkkk1
Weren't the airlines insolvent just a month or two ago, before they were
bailed out? Can we confidently say that there is a 0% chance for a deus ex
machina intervention that will bring the equity back into play?

I'm not suggesting that buying into this offering is a good idea or that
bailouts are a good idea. However, given recent experience, assigning a > 0
price to Hertz equity is not irrational.

------
jonluca
@dang the title has a typo, I think it should be "Hertz files the ..."

~~~
anthony_r
OP here, it is a typo. Too late to edit :(. Sorry!

------
caseysoftware
I still think this is a smart move for Hertz. 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.
It's a "no lose" scenario for them.

As an investor, nope. If it drops down to penny stocks, I'll go "all in" with
the $6 I can't transfer out of my Etrade account but not willing to consider
anything real.

------
KoftaBob
In other words, this is the stock market equivalent of "hot potato". The
retail investors buying on robinhood are doing so because they're betting they
wont be the last one holding the chips.

------
mot0rola
If anyone is looking for a used car, they have a lot of their fleet up for
sale here: [https://www.hertzcarsales.com/](https://www.hertzcarsales.com/)

------
apeescape
Is there a typo in the title? Right now it says "Intial Bankruptcy Offering",
but should it say "Initial Bankruptcy Offering"?

------
hogFeast
Fed Chair: no risk of asset bubbles.

...that is nice.

------
rkagerer
Was "fills" in the title supposed to read "files"?

------
thoughtstheseus
If you think this is crazy check out Bigfoot Project Investments.

------
m3kw9
A new financial instrument, how familiar!

~~~
WJW
It is actually just more of the stock that's already out there though. People
want to buy it, Hertz wants to sell it to them.

------
icedchai
Is anyone buying puts?

~~~
jaredtn
A $2 put for Jan 22 is currently trading with a 1.60-1.75 spread, meaning the
break-even point is $0.25-0.40. Not much reward to have there. No shares
available to short either.

~~~
mhb
Yes, but you would also sell the call for 0.80.

~~~
jaredtn
Good point. Are you making that trade?

~~~
mhb
No. I've considered it but it would not make for a fun time if the crazies bid
Hertz up significantly.

~~~
jaredtn
That's the thing - tough to know how long a bubble lasts for. And choosing a
time horizon based on the court system is difficult because bankruptcy
proceedings can drag on for a long long long time.

------
bananaquant
PSA: Hertz stock is already worthless. The only thing keeping it afloat are
retail investors that keep piling in. They are pretty much guaranteed to lose
money holding it.

------
AndrewBissell
Good to know we can count on the SEC to bust small-time dentists who make $70K
on options trades off insider info, and also rubber stamp financial maneuvers
which are guaranteed to harm numerous retail investors like this.

If the ruling principle of our financial markets is going to be "caveat
emptor" why don't we just disband those portions of the SEC which are supposed
to vet securities offerings?

~~~
mediaman
The filing clearly states investors will lose their money.

If you're intent on losing money, there are many worse ways to do it, and
nobody can claim this registration is deceitful.

~~~
AndrewBissell
> The filing clearly states investors will lose their money.

So if I want to sell stock with a registration statement which says, "this is
a Ponzi scheme and investors who buy in too late will lose all their money,"
that should be permissible?

~~~
nokcha
>So if I want to sell stock with a registration statement which says, "this is
a Ponzi scheme and investors who buy in too late will lose all their money,"
that should be permissible?

If you make sure that investors are actually aware (e.g., you don't try to
bury it in fine print), then I don't see why not, as long it complies with the
gambling laws of the relevant jurisdiction.

