Hertz stock faces criticism yet again, this time from the SEC.
Hertz ($HTZ), the well-known car rental company, is in the spotlight once again as they are facing scrutiny for trying to raise $500 million while filing Chapter 11 bankruptcy. On Friday, a Delaware Judge gave Hertz permission to sell up to $1 billion in stock, followed by Hertz announcing plans on Monday to raise $500 million. This led to many to criticize Hertz as they believed the company was encouraging speculation among inexperienced investors, with Hertz even stating in their Monday filing, "We are in the process of a reorganization under chapter 11 of title 11, or Chapter 11, of the United States Code, or Bankruptcy Code, which has caused and may continue to cause our common stock to decrease in value, or may render our common stock worthless. Investing in our common stock involves a high degree of risk".
Prompted by concerns with this, the SEC announced today it will be reviewing Hertz's decision to raise capital, with SEC Chairman Jay Clayton stating in a CNBC interview, "We have let the company know we have comments on their disclosure... They do no go forward until those comments are resolved". The unusual decision from Hertz to raise capital while going through bankruptcy was likely made due to the high volume of retail investors inflating the stock price, giving Hertz the opportunity to take advantage of this demand by selling stock. However, issuing stock while owing more to their creditors than their shareholder's have in assets leaves Hertz in violation with the SEC.
The stock was halted this morning just before noon, and resumed trading at 3:30 p.m. EST. in a volatile fashion, closing at $2.00 a share.