Hertz Stock Surges 130% as Traders Buy Post-Bankruptcy
Hertz Global Holdings (NYSE: HTZ), which filed for Chapter 11 bankruptcy protection on May 22 under the pressure of mounting debt payments and a near standstill in revenue generation, soared 84% higher during Thursday's trading session. Its stock price has now more than quadrupled from its opening price Wednesday, and many investors are contemplating pouring money into the volatile stock -- which would likely be a massive mistake.
Let's look at what's happening and why Hertz's common stock is not something you want to own.
Why is owning this stock a bad idea if it has quadrupled since Wednesday? One reason is that traders are speculating on the high volatility of the stock before it almost certainly goes to zero. And investors enthusiastic about the current bullish transportation and airline news may not understand Hertz's bankruptcy situation fully. American Airlines Group has said it plans to boost flights by 74% next month, suggesting that the worst is over, and that notion perhaps signaled to investors it was time to buy oversold transportation stocks. The health of airlines is an important factor for Hertz, as it generates the vast majority of its revenue from people traveling to and from airports.
Source Fool.com
