Hertz Global Holdings Inc. is confronted with questions by the US Securities and Exchange Commission over its intentions to sell shares worth as much as half a billion dollars that could be worthless in the wake of the bankruptcy of the car-rental firm.
The struggling car rental group, whose shares were suspended Wednesday, was planning the stock sale as its stocks rallied to $5.53 last week following its Chapter 11 bankruptcy filing on May 22 with a debt burden of around $19 billion. In a separate filing with the SEC earlier this week, Hertz cautioned investors about the share sale.
According to SEC Chairman Jay Clayton in an interview with CNBC on Wednesday, they have let Hertz know that "we have comments on their disclosure... in most cases when you let a company know that the SEC has comments on their disclosure, they don't go forward until those comments are resolved," as reported by Ben Bain of Bloomberg and posted on Yahoo Finance.
In the filing, Hertz disclosed that it had been advised verbally by workers with the SEC's division of corporation finance on Monday afternoon that the commission was looking to evaluate the offering's particulars.
The company said that following discussions with SEC personnel, sales were promptly halted pending further review of the timing and nature of the SEC evaluation, Hertz stated in its filing on Wednesday.
In its Monday disclosure regarding the planned stock sale, Hertz said equity investors will not see any bankruptcy plan recovery until those with higher claims, including bondholders, are paid in full.
The company said that its business outlook would require a speedy and unforeseen improvement. The startling plan has caught Wall Street's attention, and now, securities regulators.
Hertz's stock surged as much as 21 percent after Clayton's comments before falling to $1.94, in line with the closing of Tuesday. Trading was then discontinued at 11:44 a.m. in New York.
The company was forced to park around 700,000 vehicles because of the ongoing global health crisis, which has also overburdened its competitors, including Avis. Hertz shares settled Tuesday's session at $1.97 apiece, down 87 percent for 2020.
Hertz stock has rallied 96 percent so far this June, compared with advances of about 2 percent and 3 percent for the S&P 500 index and the Dow Jones Industrial Average in the same timeframe.
Hertz has previously stated in a court filing that a stock sale could help the company secure as much as $1 billion in cash. Hertz has bonds that are around $2.3 billion underwater, excluding what the group owes to lenders and any lease payments, including other expenses.
