Stockholders Claim Victory in Hertz Bankruptcy Auction

Hertz garnered intense scrutiny from the investment community when retail traders on the Robinhood app sent shares skyrocketing nearly 900% in the weeks following the company’s bankruptcy in May 2020.

In a bankruptcy auction held Tuesday, May 11, Hertz Global Holdings chose Knighthead Capital Management and Certares Management to buy the company out of Chapter 11, according to a Bloomberg report. The deal gives the new Hertz an enterprise value of $7.43 billion.

To provide equity capital for Hertz’s exit from bankruptcy exit, Hertz chose the Knighthead group over a competing offer led by Centerbridge Partners, Warburg Pincus and Dundon Capital Partners, according to the report.

Shareholders will reportedly receive close to $8 a share distribution, which amounts to warrants for close to 20% of the reorganized company. According to a tweet from Scott Wapner of CNBC, one shareholder told him the outcome and relief is “truly historic” for existing shareholders.

The agreement must still be approved by the bankruptcy judge. A hearing is scheduled for Friday. Hertz’s stock (now trading under HTZGQ) was up 33% in midday trading on May 12.

Hertz garnered intense scrutiny from the investment community when retail traders on the Robinhood app sent shares skyrocketing nearly 900% in the weeks following the company’s bankruptcy in May 2020.

Professional investors were puzzled by unsophisticated traders buying common shares of a debt-riddled bankrupt company. If history held, shareholders would realize nothing on their investments once Hertz exited bankruptcy.

A tweet by “zerohedge” summed up the mood today: “The Robinhooders were right.”

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