Market Overview

Cramer Says Don't Fall For Hertz's Cheap Price, Warns Against Bankrupt Stocks

Share:
Cramer Says Don't Fall For Hertz's Cheap Price, Warns Against Bankrupt Stocks

The shares of Hertz Global Holdings plc (NYSE: HTZ) may be trading cheap following its bankruptcy filing, but that doesn't make it a good buy, CNBC's Jim Cramer warned investors Tuesday.

Stockholders Last To Benefit, Cramer Says

"You may think a stock like Hertz or Chesapeake Energy Corporation (NYSE: CHK) looks like a steal at these levels, but the only people being robbed here are you the buyers," Cramer said, according to CNBC.

Chesapeake is also reportedly looking to file for bankruptcy, according to Bloomberg.

The CNBC "Mad Money" host said common stock-holders "are at the bottom of the bankruptcy pecking order," whereas bondholders are the first set to benefit from any profits.

"If you own Hertz here at $4, you're buying the old Hertz with $19 billion in debt that it can't repay," Cramer said. "Since the creditors can't collect, they're going to seize the collateral, which is the business. So this $4 stock will most likely just be cancelled."

Icahn's Divestment A Signal, According To Cramer

The former hedge fund manager noted that if buying or holding the common stock was profitable, activist investor Carl Icahn won't have dumped his nearly 40% stake in the car rental company.

"Believe me, if there was a real chance the common stock would be worth anything, Icahn would've stuck around. He didn't," Cramer said.

Hertz shares skyrocketed on Monday to erase post-bankruptcy losses. Whitney Tilson, on Tuesday, warned against investing in Hertz and other bankruptcy stocks.

"The bubble over the past week in bankrupt (or near-bankrupt) stocks may be the craziest thing I've seen since the internet bubble," Tilson said.

Price Action

Hertz shares closed 24.4% lower at $4.18 on Tuesday. The shares traded another 9.3% lower in the after-hours session at $3.79.

Image: Wikimedia

 

Related Articles (CHK + HTZ)

View Comments and Join the Discussion!

Posted-In: bankruptcy Bloomberg CNBCNews Penny Stocks Markets Media General Best of Benzinga