SEC takes issue with bankrupt Hertz's $1bn share sale plan

Marco Green
June 19, 2020

Hertz said on Wednesday that the stock sale had been suspended while it dealt with issues brought up by Securities and Exchange Commission officials.

On Friday the stock climbed 37.38 percent during the day, but fell 10.5 percent to $2.53 at 2130 GMT in after-market trading.

The unusual green light was given by a bankruptcy court in the U.S. state of DE, which "held a hearing and approved the Motion", according to documents filed by Hertz with the Securities and Exchange Commission (SEC). The enthusiasm has baffled professionals because common shares typically get canceled at the end of the court process, leaving equity owners empty-handed.

The sale was "promptly suspended pending further understanding of the nature and timing of the staff's review", Hertz said in its filing.

The company warned at least half a dozen times in its offering that would-be buyers could find themselves wiped out.

"Typically when the SEC issues comments on a proposed offering as Chairman Clayton said, the issuer considers them and makes the necessary changes in the papers filed", said Thomas Gorman, partner at the worldwide law firm Dorsey Whitney and an expert on SEC enforcement. While the SEC could let the offering go effective if there is no resolution, that would be most unusual. It scaled back the sum after the price receded.

The idea won approval from a bankruptcy judge last week during a hearing in which an SEC attorney said the commission would be reviewing the proposal.

Traditionally, shares of bankrupt companies lose value with debt repayment taking precedence. It announced on Monday plans to sell up to $500 million in new shares, as it takes advantage of a strong rally in its stock since filing for bankruptcy last month.

Other reports by Click Lancashire

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