Two weeks after the car rental company filed for bankruptcy, shares of Hertz Global Holdings Inc made a surprise surge in an interesting show of trust investors are giving on rebound from the ongoing global crisis.
Not long after the start of daily trading Friday, the car renter 's stock traded as high as $3.70, a 353 percent increase from Wednesday's close. The two-day advance is partly an indication of signs that demand in aviation is about to normalize.
Hertz is also expected to profit from used vehicles prices coming all the way back from a decline around middle of April. Market explorer J.D. Power disclosed on Thursday that last week's prices breached its pre-pandemic projections.
Shares of Hertz Global Holdings skyrocketed over 130 percent on Friday after a solid May employment data and optimistic developments from the aviation sector that suggests the worst could be over. However, investors must still analyze Hertz's current situation.
The company's shares climbed 85 percent higher on Thursday's session. Its stock price has just increased four-fold compared to its opening price on Wednesday, and many investors are now thinking about allotting money into the unpredictable stock, which may turn out to be a mistake.
Equity holders of the car rental group are still taking on some big risk. Shareholders most often than not recover anything from businesses that have filed for Chapter 11 bankruptcy because under the terms of the US Bankruptcy Code, a firm's total debts must be settled in full before stakeholders could recover anything.
The recovery in used car prices is a major plot shift compared from a few weeks earlier, Morgan Stanley auto analyst Adam Jonas, stated in a report. Hertz's holders of asset-supported securities, which are backed by the value of the company's fleet of vehicles, now has a bigger chance of being made whole.
Meanwhile, the plunge in demand for new vehicles from American rental car companies dealt a heavy blow on car manufacturers last month, even as consumer profits were stronger than anticipated as pandemic stay-at-home orders started to loosen.
The massive drop in passenger air travel has forced major car rental firms to scrap orders for new units, dragging down sales for almost a dozen US car companies, including the Big 3 in Detroit.
Car makers could shed up to 11 percent of their yearly vehicle revenues in the US this year as car rental companies battered by the global health crisis cut fleet size and undergo massive restructuring, according to Jefferies.
