Hertz Global Holdings (OTCMKTS:HTZGQ) is now trading on the “pink sheets” as an unlisted security. On Oct. 30, the New York Stock Exchange filed SEC Form 25 and kicked Hertz stock off of the NYSE with immediate effect.
This is an indication that Hertz stock has virtually no value and no one should be buying it.
As of Nov. 3, the pink sheet symbol HTZGQ closed at 91 cents per share. The previous symbol “HTZ” from the NYSE is no longer valid, so whatever price you see associated with that symbol is incorrect.
Let me say this again, HTZ is no longer trading on the NYSE. The company also confirmed this. Only the most speculative of gamblers would even think of buying this worthless stock. Here is why.
Hertz Is Completely Worthless
Even though Hertz Global Holdings is in Chapter 11 proceedings, no one should be under any delusion that Hertz stock has any value. Common stock shareholders will have nothing once the company emerges from Chapter 11 if it does at all.
For one, you can follow the public bankruptcy proceedings by clicking on the following website run by Duff & Phelps: Case No.20-11218.
You can see from that site there are a number of hearings in November in the Federal Bankruptcy Court in Delaware. None of them have any indication that existing common stock shareholders will receive any value.
Second, recently the company signed a Debtor-In-Possession (DIP) agreement with various financing sources. On Oct. 15, the company announced that it had reached an agreement to fund its fleet. However, that debt has collateral on virtually all of the company’s assets.
Moreover, the term sheet for that DIP financing is completely confidential. That is not a good sign. There is no hope of a scintilla of a chance, including a rights offering, warrants, or any kind of security for Hertz stock owners. The company would have had to announce that information.
Third, the company recently lost its chief accounting officer. That is also not a good sign, even though he was immediately replaced by a person within the company. This is a red flag event.
Fourth, it has been a long time since the company announced its Chapter 11 filing for its U.S. assets. The filing was made on May 22. There was no agreement with creditors at the time.
There still does not seem to be any agreement among creditors and the company about who will get what equity sliver if it emerges from Chapter 11.
For these reasons, and frankly the delisting of Hertz stock, I believe that the stock is completely worthless.
What to Do If You Own Hertz Stock
There is no point anymore of holding on any longer if you still own the Hertz stock in your portfolio. Once it is 100% clear that the existing equity is worthless, the stock will be much lower.
By the way, the day before the company delists and cancels all shares Hertz stock may not be at zero. There is always someone who wants to try and push the stock up and pawn it off on a greater fool.
It is also not clear yet when the company if at all, will emerge from Chapter 11. Barron’s had an unfortunate article on Oct. 16, that seems to imply that Hertz stock might have some value. This was written after the stock moved up on the news of the DIP financing.
But Barron’s did not say there is no guarantee, nor any agreement among creditors to provide any value to common stock owners.
In fact, by law, its board of directors is now only supposed to look out for the interests of the creditors first, not common stock shareholders. Preferred stock owners have more rights than common stock owners.
Probably the best indication that Hertz stock is worthless, is its bond prices. Hertz bonds now trade for just 37 cents to 39 cents on the dollar.
You can see this by going to Morningstar’s bond center site and click on the search box and type in “Hertz” in the search bar. That shows a list of the Hertz bonds and their trading prices.
In fact, even if you are thinking of investing in those bonds, keep in mind these are risky securities. The point is if the bonds are so trading so low, then the market believes that Hertz stock is completely worthless.
On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.