What in the World Is Going on with Hertz Stock?
Hertz (NYSE: HTZ), a vehicle rental company now in the middle of the bankruptcy process, continued to mystify market onlookers as its share price jumped 21% Tuesday morning before quickly reversing course and diving back into the red. What in the world is going on with this stock?
One piece of data that may help explain Hertz stock's volatility Monday and Tuesday is that its bankruptcy judge has approved the company to issue up to roughly 246 million new shares, a move that would allow it to take advantage of the recent speculative run-up in its stock price. That's certainly a significant amount, given that Hertz currently has roughly 142 million shares outstanding. This stock offering will not only cause dilution by most definitions, it will add interesting pressure to the stock price. One theory behind the stock's speculative rise was a short-squeeze, and when a surplus of shares are added it could effectively end the short-squeeze by allowing new short-sellers to put in their new short orders. Remember the stock is likely going to zero, making it enticing for shorts, and some who wanted to weren't able to borrow shares to short previously. All of this has the potential to add downward pressure to Hertz's stock price. Ultimately, Hertz shares will continue to be volatile throughout bankruptcy.
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Source Fool.com