The day traders who bet on Hertz Global Holdings Inc. despite its bankruptcy last year were on to something, according to hedge-fund shareholders making a play to back the rental-car company’s exit from chapter 11, WSJ Pro Bankruptcy reported. Hertz stockholders including Glenview Capital Management LLC and Discovery Capital Management have formed a shareholder committee in the chapter 11 case and hope to fashion a restructuring that will lift Hertz out of bankruptcy, their lawyer Andrew Glenn said in an interview. The equity of bankrupt companies is most often worthless, save for the few instances in which the debt can be fully paid with a surplus of value left over for shareholders. In Hertz’s case, “the equity is in the money,” said Mr. Glenn of law firm Glenn Agre Bergman & Fuentes LLP. Risk-hungry individual investors thought the same after Hertz filed for bankruptcy last year, an early casualty of the travel-deadening effects of the Covid-19 pandemic. Unlike many stocks that cratered in value because of stay-at-home restrictions, Hertz took on new life when individual investors sent its shares on a gravity-defying rally, despite the severe financial strains it was facing. In a speculative frenzy that preceded the GameStop Corp. phenomenon, day traders piled into Hertz early last June, sending shares surging from 56 cents after it filed for bankruptcy to above $5.50 less than two weeks later — a nearly 900% rally — before declining again. Hertz sought to capitalize on the trading frenzy by offering up to $1 billion in shares, a seemingly unprecedented move for a large company in chapter 11. Hertz acknowledged the shares were potentially worthless and called off the effort after the Securities and Exchange Commission raised questions, but not before issuing $29 million worth of equity. Even in the months after the stock’s sharp rise and fall, individual investors continued to discuss and tout Hertz online, with some predicting the company could make a comeback.
