What It Means to Buy Stock in a Bankrupt Company Like Hertz
Hertz headquarters in Florida.
Photo: Alamy
It’s one of the wildest tales in 2020’s wild-enough market. Rental car giant Hertz Global Holdings Inc. declared bankruptcy, and its stock quickly fell to 56¢ a share. Then hordes of investors—apparently looking for a cheap way to buy the dip—piled into the stock, driving the price up tenfold at one point. That gave Hertz a bright idea: Raise some cash by selling even more shares. A judge approved the sale.
On June 17, U.S. Securities and Exchange Commission Chairman Jay Clayton told CNBC that the agency had “comments” for Hertz on its plan. Hertz suspended the stock sale pending review. Whatever happens, the saga casts light on why buying shares in a company that’s filed for bankruptcy is so risky.