Hertz Global Holdings Stock

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Contributor, Benzinga
November 8, 2021
$12.59
-0.52[-3.97%]
Last update: 4:00PM (Delayed 15-Minutes)
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Open12.980Close12.590
Vol / Avg.4.175M / 2.934MMkt Cap3.919B
Day Range12.530 - 13.18052 Wk Range13.030 - 20.480

In the immediate aftermath of the COVID-19 pandemic, several images have been seared into the collective consciousness. For millions of Americans, the photos of world-famous locales such as Manhattan or the wild streets of Las Vegas rendered to nothing more than the backdrop of a post-apocalyptic movie cannot be forgotten anytime soon.

But in the business world, few implosions were as dramatic and paradigm-altering as the bankruptcy of Hertz Global Holdings, Inc. (Pink: HTZZ). One of the most recognizable brands across the globe and a symbol of American economic prowess and influence, Hertz — through no fault of its own — suddenly found itself unable to make ends meet.

With the mysterious SARS-CoV-2 virus rapidly spreading from the coastlines to the inner territories, in a blink of an eye, travel demand plummeted. At the low point in May 2020, air revenue passenger miles registered at 3.54 billion according to the U.S. Bureau of Transportation. That metric translated to a staggering 96% loss on a year-over-year basis.

Without the downwind benefits of providing rental car services to travelers, Hertz was behind the 8-ball. However, a remarkable series of events, most importantly the recovery from the pandemic, has convinced management to perform a “redo” of its initial public offering (IPO).

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When Is the Hertz IPO Date?

An unusual process to say the least, Hertz’s management team refers to its upcoming entrance on the IPO calendar as a “re-IPO.” Currently though, Hertz shares trade hands on the OTC Markets, the market for securities that don't trade on exchanges. So Tuesday is technically an "uplisting" to the Nasdaq stock exchange.

However, unlike a pure uplisting, the rental car company plans to raise funds from its second market debut, making this one of the most complicated IPOs in memory. Under the terms of the deal, Hertz plans to raise $1 billion through the distribution of 37.1 million shares, with an estimated price range between $25 and $29 per unit.

At the midpoint of the pricing spectrum, Hertz will command a valuation of $13.9 billion. Shares will trade on the Nasdaq exchange under the ticker symbol HTZ, with the uplisting (or re-IPO) scheduled to occur on Nov. 9.

Similar to a traditional public market debut in which a private enterprise offers equity shares for the first time, Hertz has several underwriters that are supporting this deal. Goldman Sachs (NYSE: GS), JPMorgan Chase & Co. (NYSE: JPM), Morgan Stanley (NYSE: MS), Barclays (NYSE: BCS) and Deutsche Bank (NYSE: DB) represent the joint bookrunners on this unusual but much anticipated uplisting.

One particular detail for prospective participants of HTZ stock to note is that following the completion of the offering, Hertz intends to repurchase between $250 million to $500 million worth of stock from the underwriting institutions. Typically, companies buy back their equity units to return value to stakeholders by reabsorbing ownership interest and thus making each share worth more in proportion.

As well, repurchasing equity has the effect of making the underlying organization appear more financially sound. Usually, public corporations in desperate straits will start offloading shares as quickly as possible, generating cash at the longer-term expense of share dilution. In this case, the opposite dynamic is occurring, which may provide investors confidence.

At the same time, companies don’t file for bankruptcy because it’s fashionable. The last resort for an individual or a corporation, bankruptcies send the message that the underlying business is unfeasible. Since HTZ stock will still face the same competitive pressures in the post-pandemic ecosystem, it’s fair to ask if anything fundamental has changed.

Hertz Financial History

At the start of the COVID-19 pandemic, few analysts were willing to make bold upside predictions for the global rental car industry. Indeed, Hertz’s bankruptcy was the marquee event — albeit an awfully dubious one — that sent a shudder through the economy. However, the never-say-never attitude that’s uniquely American helped shift the framework to a surprisingly optimistic one.

Now, the positive outlook has more investors curious about the financial viability undergirding HTZ stock. For instance, data from Grand View Research indicates that in 2020, the global car rental market reached a valuation of $98.14 billion. However, by 2028, insiders peg the sector to generate total revenue of $141.17 billion, representing a compound annual growth rate (CAGR) of 4.6%.

Further, Grand View Research points out that “bleisure” — or the combination of leisure travel with a business trip — has gained popularity throughout the world. A prime example is the accompaniment of family on corporate trips. As well, bullish investors can reasonably bank on retail revenge or increased spending to make up for lost time to bolster HTZ stock.

Regarding the financials, Hertz’s prospectus filed with the U.S. Securities and Exchange Commission (SEC) elucidates the damage that the pandemic caused. Between 2018 and 2019, Hertz generated average annual revenue of $9.64 billion. In 2020, though, top-line sales veritably tanked to $5.25 billion, a loss of 46% against the prior year.

On the positive side of the fence, Hertz has been steadily gaining momentum in its post-bankruptcy initiatives. In the 9 months ending Sept. 30, 2021, the company posted revenue of $5.39 billion, which is up 34% against the year-ago comparison. Additionally, net income came in at $627 million for the current-year period, a far cry from the net loss of nearly $1.7 billion during the first 3 quarters of 2020.

However, before you buy HTZ stock, you should review the underlying company’s issuance of 89 million public warrants. To make a long story short, Hertz shares have the potential to be dilutive because warrant exercise implies the issuance of newly created stock, not the transferring of already outstanding stock.

Hertz Potential

Easily among the trickiest investments you can make this year, interested buyers should really take their time with the Hertz IPO. For one thing, the combination of elements involving an IPO and an uplisting is rare. Second, the potential dilution of the distributed warrants means that even if supporting fundamentals are aligned perfectly, the structure of this deal could still see HTZ traders lose out.

Still, HTZ compels contrarians because management has engaged in an all-out blitz to save the Hertz brand. As mentioned in the company’s IPO prospectus, Hertz placed an initial order of 100,000 Tesla Inc. (NASDAQ: TSLA) Model 3 electric vehicles (EVs) to be delivered by the end of 2022. This order tally translates to roughly 22% of Hertz’s current global fleet.

Most importantly, the success of the COVID-19 vaccination rollout combined with the resurgence of travel — both in the air and on the ground — point toward robust demand for rental cars. In turn, this catalyst could spike HTZ stock.

Be mindful, though, of the risks. As CBS News recently pointed out, the world may not yet be done with COVID resurgences. Any upset in this department could send jitters throughout the economy. Also, the competition will not simply roll out the red carpet for Hertz, which means any venture into HTZ stock will not be easy.

How to Buy Hertz IPO (HTZ) Stock

Since HTZ stock is available as HTZZ in the OTC market, you can place your order right now if you know how to buy stocks. If not, follow the steps below.

Step 1: Pick a brokerage.

With brokerages nowadays marketing near-identical incentives, it’s in your interest to narrow your list of best brokers to platforms that align with your preferences and desire to develop your investing knowledge.

Step 2: Decide how many shares you want.

Any IPO (or re-IPO in this case) is a step into the unknown. To mitigate downside risk, make sure to participate with a balanced share count.

Step 3: Choose your order type.

Before placing your first trade, understand these market concepts.

  • Bid: The buyer’s best offer for a stock.
  • Ask: The seller’s lowest acceptable price.
  • Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
  • Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
  • Market order: Market orders guarantee fulfillment but only at the current rate.
  • Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
  • Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.

Step 4: Execute your trade.

Follow these steps to execute a market order:

  1. Select your action type (buy or sell).
  2. Enter the shares you want to acquire (or sell).
  3. Hit the Buy (or Sell) button.

Follow the same sequence for limit orders (but include your execution price).

HTZ Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating. Avoid buying stocks which you have privileged information on.

HTZ Pre-IPO

For traditional IPOs, you can open an account with ClickIPO, which distributes new issues of select enterprises at their initial offering price (or pre-IPO price).

The Phoenix Rises But With Stipulations

An American icon, the restoration of Hertz carries a deeper meaning that goes beyond the bottom line. At the same time, the company’s core rivals stayed in the fight without pulling the bankruptcy card, implying greater competitiveness ahead. Further, no investor should acquire HTZ stock without first understanding the dilution risks of warrants.

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