The Hertz (NYSE:HTZ) bankruptcy is still making news Friday as the car rental company looks for ways to survive.
Hertz has announced that it wants to sell new shares of its stock to help raise money during the bankruptcy. The idea of selling shares during bankruptcy is a strange one, but HTZ is arguing that its increasing share price warrants the move.
Hertz is hoping that selling news shares of its stock while investors pump up its price could be an alternative to normal bankruptcy proceedings. While the idea is interesting, it has some problems, notes New York Post.
First off, Hertz wants to raise $1 billion by selling 246 million shares of its stock. That means the company would have to price the new shares at $4.05 each. While HTZ stock has gone above this price during its bankruptcy, it wasn’t able to maintain it. The stock last closed out at $2.06 each on Thursday.
Another problem is getting court approval for the unconventional financing method. Doing that may be difficult enough as the company would have to open itself up to all sorts of legal hurdles. Even so, news of new shares during the Hertz bankruptcy already has the stock heading higher today.
Jared Ellias, a University of California law professor, told The Next Web the following about the Hertz bankruptcy news.
“Hertz looks at the market and sees there is a group of irrational traders who are buying the stock, and the response to that is to seek to sell stock to these people in hopes of raising some amounts of money to fund their restructuring.”
HTZ stock was up 42.7% as of Friday afternoon.
As of this writing, William White did not hold a position in any of the aforementioned securities.
