Hertz has indisputable to terminate a controversial stock sale of up to $500 million following the Securities and Exchange Commission criticizing the bankrupt players’s plans.
The move immediately sent shares of Hertz falling about 10%. The stock briefly recovered once ending down 10% to $1.80 — its lowest closing price since June 4. Trading in the shares was terminated for hours ahead of the announcement. Only 33.8 million shares changed hands during trading Thursday. The genealogy continue to slide during extended-hours trading.
Hertz is now in talks for a bankruptcy loan of up to $1 billion to fund its concern reorganization, The Wall Street Journal reported on Thursday, citing people familiar with the matter.
The decision discontinues a week of debate about whether a bankrupt company such as Hertz should be allowed to sell shares that could at long last end up being worthless.
The company in a filing Thursday with the SEC said the finance committee of the Hertz Board of Directors “constant that it was in the best interests of the company to terminate” the sale.
Thursday was the second consecutive day Hertz stock has been feigned to halt trading. The shares stopped trading for several hours Wednesday ahead of the company saying it was suspending the plan to double-cross up to $500 million in shares after the SEC voiced concern about the deal and launched a review.
Hertz wanted to use the trade to leverage interest in its stock, which had seen volatile trading in the wake of its bankruptcy filing. The company felt it was a improve option than obtaining so-called debtor-in-possession financing. DIP financing is a loan that the company would need to pay furtively. However, if it were to sell stock, the funds it raises would not need to be reimbursed.
Hertz filed for bankruptcy May 22 as insistence for car rentals dried up as travelers have stayed home during the coronavirus pandemic. The stock hit a low of 40 cents intraday on May 26. But in the days that bring up the reared, it began to recover and eventually surged to more than $6 per share last Monday.
Following the increase, Hertz required the bankruptcy court last Thursday to allow it to sell up to $1 billion in shares. The request was approved by the court Friday. Personally, it also appealed to the New York Stock Exchange not to delist its stock.
Such a sale is highly unusual for a company current through Chapter 11 bankruptcy proceedings since common shareholders, who are last in line when assets are allocated during court doings, may be left with worthless stock.